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PROSPECTUS DECEMBER 23, 1993
DREYFUS FOCUS FUNDS, INC.
DREYFUS FOCUS FUNDS, INC. (THE "FUND") IS AN OPEN-END, MANAGEMENT INVESTMENT
COMPANY, KNOWN AS A MUTUAL FUND. THE FUND PERMITS YOU TO INVEST IN FOUR SEPARATE
DIVERSIFIED PORTFOLIOS (EACH, A "PORTFOLIO"): DREYFUS LARGE COMPANY GROWTH;
DREYFUS LARGE COMPANY VALUE; DREYFUS SMALL COMPANY GROWTH; AND DREYFUS SMALL
COMPANY VALUE. EACH PORTFOLIO'S INVESTMENT OBJECTIVE IS CAPITAL APPRECIATION.
EACH PORTFOLIO WILL SEEK TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING IN A
PORTFOLIO OF PUBLICLY-TRADED COMMON STOCKS IN ONE OF FOUR SUB-CATEGORIES OF
COMPANIES WHICH MEET CERTAIN CRITERIA ESTABLISHED BY THE DREYFUS CORPORATION.
IN ADDITION TO USUAL INVESTMENT PRACTICES, EACH PORTFOLIO WILL USE
SPECULATIVE INVESTMENT TECHNIQUES SUCH AS SHORT-SELLING, BORROWING FOR
INVESTMENT PURPOSES, AND FUTURES AND OPTIONS TRANSACTIONS.
THE DREYFUS CORPORATION WILL PROFESSIONALLY MANAGE EACH
PORTFOLIO.
SHARES OF EACH PORTFOLIO BEAR CERTAIN COSTS PURSUANT TO A
DISTRIBUTION PLAN ADOPTED IN ACCORDANCE WITH RULE 12B-1 UNDER THE
INVESTMENT COMPANY ACT OF 1940 AND A SHAREHOLDER SERVICES PLAN.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS TELETRANSFER.
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THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE
FUND THAT YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
PART B (ALSO KNOWN AS THE STATEMENT OF ADDITIONAL INFORMATION),
DATED DECEMBER 23, 1993, WHICH MAY BE REVISED FROM TIME TO TIME,
PROVIDES A FURTHER DISCUSSION OF CERTAIN AREAS IN THIS PROSPECTUS
AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME INVESTORS. IT
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS
INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, WRITE TO THE
FUND AT 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK 11556-
0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 666.
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THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. THE FUND'S SHARES INVOLVE CERTAIN RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. EACH PORTFOLIO'S SHARE PRICE AND
INVESTMENT RETURN FLUCTUATE AND ARE NOT GUARANTEED.
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TABLE OF CONTENTS
PAGE
ANNUAL FUND OPERATING EXPENSES............................ 2
DESCRIPTION OF THE FUND................................... 2
MANAGEMENT OF THE FUND.................................... 14
HOW TO BUY FUND SHARES.................................... 15
SHAREHOLDER SERVICES...................................... 17
HOW TO REDEEM FUND SHARES................................. 20
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN........... 22
DIVIDENDS, DISTRIBUTIONS AND TAXES........................ 23
PERFORMANCE INFORMATION................................... 24
GENERAL INFORMATION....................................... 24
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
LARGE LARGE SMALL SMALL
COMPANY COMPANY COMPANY COMPANY
GROWTH VALUE GROWTH VALUE
------ ----- ------ -----
Management Fees.................... .75% .75% .75% .75%
12b-1 Fees......................... .50% .50% .50% .50%
Service Fees....................... .25% .25% .25% .25%
Other Expenses..................... .50% .50% .50% .50%
Total Portfolio Operating Expenses. 2.00% 2.00% 2.00% 2.00%
EXAMPLE:
An investor would pay the
following expenses on a $1,000
investment, assuming (1) 5%
annual return and (2) redemption
at the end of each time period:
1 YEAR....................... $20 $20 $20 $20
3 YEARS...................... $63 $63 $63 $63
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE
ASSUMES A 5% ANNUAL RETURN, EACH PORTFOLIO'S ACTUAL PERFORMANCE
WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in understanding the
various costs and expenses borne by the Fund, and therefore indirectly by
investors, the payment of which will reduce investors' return on an annual
basis. Other Expenses and Total Fund Operating Expenses are based on estimated
amounts for the current fiscal year. The information in the foregoing table
does not reflect any fee waivers or expense reimbursement arrangements that
may be in effect. Certain Service Agents (as defined below) may charge their
clients direct fees for effecting transactions in Fund shares; such fees are
not reflected in the foregoing table. Long-term investors could pay more in
12b-1 fees than the economic equivalent of paying a front-end sales charge.
For a further description of the various costs and expenses incurred in the
operation of the Fund, as well as expense reimbursement or waiver
arrangements, see "Management of the Fund," "How to Buy Fund Shares"
and "Distribution Plan and Shareholder Services Plan."
DESCRIPTION OF THE FUND
GENERAL - The Fund is a "series fund," which is a mutual fund divided into
separate portfolios. Each Portfolio is treated as a separate entity for
certain matters under the Investment Company Act of 1940 and for other purposes,
and a shareholder of one Portfolio is not deemed to be a
shareholder of any other Portfolio. As described below, for certain
matters Fund shareholders vote together as a group; as to others they vote
separately by Portfolio.
INVESTMENT OBJECTIVE - Each Portfolio's goal is capital appreciation.
Each Portfolio's investment objective cannot be changed without approval
by the holders of a majority (as defined in the Investment Company Act of
1940) of such Portfolio's outstanding voting shares. There can be no
assurance that a Portfolio's investment objective will be achieved.
MANAGEMENT POLICIES - DREYFUS LARGE COMPANY GROWTH will invest,
under normal market conditions, substantially all of its assets in equity
securities of issuers with market capitalizations of between $900 million
and $90 billion identified by The Dreyfus Corporation as growth
companies.
DREYFUS LARGE COMPANY VALUE will invest, under normal market
conditions, substantially all of its assets in equity securities of issuers with
market capitalizations of between $900 million and $90 billion
identified by The Dreyfus Corporation as value companies.
DREYFUS SMALL COMPANY GROWTH will invest, under normal market
conditions, substantially all of its assets in equity securities of issuers with
market capitalizations of between $90 million and $900 million
identified by The Dreyfus Corporation as growth companies.
2
DREYFUS SMALL COMPANY VALUE will invest, under normal market
conditions, substantially all of its assets in equity securities of issuers with
market capitalizations of between $90 million and $900 million
identified by The Dreyfus Corporation as value companies.
To determine whether a company's stock falls within the growth or
value classification, The Dreyfus Corporation analyzes each company
based on fundamental factors such as price to book value ratios, price to
earnings ratios, earnings growth, dividend payout ratios, return on equity,
and the company's beta (a measure of stock price volatility relative to the
market generally). In general, The Dreyfus Corporation believes that
companies with relatively low price to book ratios, low price to earnings ratios
and higher than average dividend payments in relation to price
should be classified as value companies. Alternatively, companies which
have above average earnings or sales growth and retention of earnings and
command higher price to earnings ratios fit the more classic growth description.
The Dreyfus Corporation anticipates that at least 65% of the value of
each Portfolio's total assets (except when maintaining a temporary
defensive position) will be invested in equity securities. Equity securities
consist of common stocks, convertible securities and preferred stocks.
Each Portfolio may invest, in anticipation of investing cash positions, in money
market instruments consisting of U.S. Government securities,
certificates of deposit, time deposits, bankers' acceptances, short-term
investment grade corporate bonds and other short-term debt instruments,
and repurchase agreements, as set forth under "Certain Portfolio
Securities" below. Under normal market conditions, the Fund does not
expect to have a substantial portion of its assets invested in money
market instruments. However, when The Dreyfus Corporation determines
that adverse market conditions exist, each Portfolio may adopt a
temporary defensive posture and invest all of its assets in money market
instruments.
In an effort to increase each Portfolio's returns, the Fund may engage in
various investment techniques which, if successful, would produce short-
term capital gains. The use of investment techniques such as short-
selling, borrowing for investment purposes, engaging in foreign exchange
transactions, engaging in options and futures transactions and lending of
portfolio securities involves greater risk than that incurred by many other
funds. You should purchase shares of a Portfolio only as a supplement to an
overall investment program and only if you are willing to undertake the
risks involved.
INVESTMENT TECHNIQUES
LEVERAGE THROUGH BORROWING - Each Portfolio may borrow for
investment purposes. This borrowing, which is known as leveraging,
generally will be unsecured, except to the extent a Portfolio enters into
reverse repurchase agreements described below. The Investment Company
Act of 1940 requires each Portfolio to maintain continuous asset coverage
(that is, total assets including borrowings, less liabilities exclusive of
borrowings) of 300% of the amount borrowed. If the 300% asset coverage
should decline as a result of market fluctuations or other reasons, a
Portfolio may be required to sell some of its portfolio holdings within
three days to reduce the debt and restore the 300% asset coverage, even
though it may be disadvantageous from an investment standpoint to sell
securities at that time. Leveraging may exaggerate the effect on net asset value
of any increase or decrease in the market value of the Portfolio's investment
securities. Money borrowed for leveraging will be subject to interest costs that
may or may not be recovered by appreciation of the securities purchased; in
certain cases, interest costs may exceed the return received on the securities
purchased. Each Portfolio also may be required to maintain minimum average
balances in connection with such borrowing or to pay a commitment or other fee
to maintain a line of credit; either of these requirements would increase the
cost of borrowing over the stated interest rate.
Among the forms of borrowing in which each Portfolio may engage is
the entry into reverse repurchase agreements with banks, brokers or
dealers. These transactions involve the transfer by a Portfolio of an underlying
debt instrument in return for cash proceeds based on a percentage of the value
of the security. The Portfolio retains the right to receive interest and
principal payments on the security. At an agreed upon future date, the Portfolio
repurchases the security at principal, plus accrued interest. In certain types
of agreements, there is no agreed upon repurchase date and interest payments are
calculated daily, often based on the pre-
3
vailing overnight repurchase rate. Each Portfolio will maintain in a segregated
custodial account cash or U.S. Government securities or other
high quality liquid debt securities at least equal to the aggregate amount
of its reverse repurchase obligations, plus accrued interest, in certain
cases, in accordance with releases promulgated by the Securities and
Exchange Commission. The Securities and Exchange Commission views
reverse repurchase transactions as collateralized borrowings by the
relevant Portfolio. These agreements, which are treated as if
reestablished each day, are expected to provide the Portfolios with a
flexible borrowing tool.
SHORT-SELLING - Each Portfolio may make short sales, which are
transactions in which the Portfolio sells a security it does not own in
anticipation of a decline in the market value of that security. To complete such
a transaction, the Portfolio must borrow the security to make
delivery to the buyer. The Portfolio then is obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. The price at such time may be more or less than the price at
which the security was sold by the Portfolio. Until the security is
replaced, the Portfolio is required to pay to the lender amounts equal to
any dividends, interest or other distributions which accrue during the
period of the loan. To borrow the security, the Portfolio also may be
required to pay a premium, which would increase the cost of the security
sold. The proceeds of the short sale will be retained by the broker, to the
extent necessary to meet margin requirements, until the short position is closed
out.
Until a Portfolio closes its short position or replaces the borrowed
security, the Portfolio will: (a) maintain a segregated account, containing
cash or U.S. Government securities, at such a level that (i) the amount
deposited in the account plus the amount deposited with the broker as collateral
will equal the current value of the security sold short and (ii)
the amount deposited in the segregated account plus the amount deposited
with the broker as collateral will not be less than the market value of the
security at the time it was sold short; or (b) otherwise cover its short
position.
A Portfolio will incur a loss as a result of the short sale if the price of
the security increases between the date of the short sale and the date on
which the Portfolio replaces the borrowed security. A Portfolio will
realize a gain if the security declines in price between those dates. This
result is the opposite of what one would expect from a cash purchase of a
long position in a security. The amount of any gain will be decreased, and
the amount of any loss increased, by the amount of any premium or
amounts in lieu of dividends, interest or other distributions the Portfolio
may be required to pay in connection with a short sale.
Each Portfolio may purchase call options to provide a hedge against an
increase in the price of a security sold short by the Portfolio. When a
Portfolio purchases a call option it has to pay a premium to the person
writing the option and a commission to the broker selling the option. If
the option is exercised by the Portfolio, the premium and the commission
paid may be more than the amount of the brokerage commission charged if
the security were to be purchased directly. See "Call and Put Options on
Specific Securities" below.
The Fund anticipates that the frequency of short sales on behalf of a
Portfolio will vary substantially under different market conditions, and it does
not intend that any specified portion of a Portfolio's assets, as a
matter of practice, will be invested in short sales. However, no securities will
be sold short if, after effect is given to any such short sale, the total market
value of all securities sold short by a Portfolio would exceed 25%
of the value of such Portfolio's net assets. A Portfolio may not sell short
the securities of any single issuer listed on a national securities exchange
to the extent of more than 5% of the value of such Portfolio's net assets.
A Portfolio may not sell short the securities of any class of an issuer to
the extent, at the time of the transaction, of more than 5% of the
outstanding securities of that class.
In addition to the short sales discussed above, each Portfolio may make
short sales "against the box," a transaction in which the Portfolio enters
into a short sale of a security which such Portfolio owns. The proceeds of
the short sale will be held by a broker until the settlement date at which
time the Portfolio delivers the security to close the short position. The
Portfolio receives the net proceeds from the short sale. The Fund at no
time will have more than 15% of the value of a Portfolio's net assets in
deposits on short sales against the box.
FOREIGN CURRENCY TRANSACTIONS - Each Portfolio may engage in
currency exchange transactions to the extent consistent with its
investment objective or to hedge its portfolio. Each Portfolio will conduct
its curren-
4
cy exchange transactions either on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, or through entering into forward
contracts to purchase or sell currencies. A forward currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which must be more than two days from the
date of the contract, at a price set at the time of the contract. Forward
currency exchange contracts are entered into in the interbank market
conducted directly between currency traders (typically commercial banks
or other financial institutions) and their customers. Each Portfolio also
may combine forward currency exchange contracts with investments in
securities denominated in other currencies.
Each Portfolio also may maintain short positions in forward currency
exchange transactions, which would involve the Portfolio agreeing to
exchange an amount of a currency it did not currently own for another
currency at a future date in anticipation of a decline in the value of the
currency sold relative to the currency the Portfolio contracted to receive
in the exchange. The Portfolio will maintain in a segregated custodial
account cash or U.S. Government securities or other high quality liquid
debt securities at least equal to the aggregate amount of its short
positions, plus accrued interest, in certain cases, in accordance with
releases promulgated by the Securities and Exchange Commission.
OPTIONS ON FOREIGN CURRENCY - Each Portfolio may purchase and sell call
and put options on foreign currency for the purpose of hedging against
changes in future currency exchange rates. Call options convey the right to
buy the underlying currency at a price which is expected to be lower than
the spot price of the currency at the time the option expires. Put options
convey the right to sell the underlying currency at a price which is anticipated
to be higher than the spot prices of the currency at the time
the option expires. Each Portfolio may use foreign currency options for the same
purposes as forward currency exchange and futures transactions, as described
herein. See also "Call and Put Options on Specific Securities"
and "Currency Futures and Options on Currency Futures" below.
CALL AND PUT OPTIONS ON SPECIFIC SECURITIES - Each Portfolio may
invest up to 5% of its assets, represented by the premium paid, in the
purchase of call and put options in respect of specific securities (or
groups or "baskets" of specific securities) in which the Portfolio may
invest. Each Portfolio may write covered call and put option contracts to
the extent of 20% of the value of its net assets at the time such option
contracts are written. A call option gives the purchaser of the option the right
to buy, and obligates the writer to sell, the underlying security or securities
at the exercise price at any time during the option period. Conversely, a put
option gives the purchaser of the option the right to sell, and obligates the
writer to buy, the underlying security or securities at
the exercise price at any time during the option period. A covered call
option sold by a Portfolio, which is a call option with respect to which the
Portfolio owns the underlying security or securities, exposes the
Portfolio during the term of the option to possible loss of opportunity to
realize appreciation in the market price of the underlying security or
securities or to possible continued holding of a security or securities
which might otherwise have been sold to protect against depreciation in
the market price thereof. A covered put option sold by a Portfolio exposes
the Portfolio during the term of the option to a decline in price of the
underlying security or securities. A put option sold by a Portfolio is
covered when, among other things, cash or liquid securities are placed in a
segregated account with the Fund's custodian to fulfill the obligation
undertaken.
To close out a position when writing covered options, a Portfolio may
make a "closing purchase transaction," which involves purchasing an
option on the same security or securities with the same exercise price
and expiration date as the option which it has previously written. To close
out a position as a purchaser of an option, a Portfolio may make a "closing sale
transaction," which involves liquidating the Portfolio's position by selling the
option previously purchased. A Portfolio will realize a profit
or loss from a closing purchase or sale transaction depending upon the
difference between the amount paid to purchase an option and the amount received
from the sale thereof.
The Fund intends to treat options in respect of specific securities that are
not traded on a national securities exchange and the securities
underlying covered call options written by the Portfolios as illiquid
securities. See "Certain Portfolio Securities - Illiquid Securities" below.
Each Portfolio will purchase options only to the extent permitted by the
policies of state securities authorities in states where shares of the
Portfolios are qualified for offer and sale.
5
STOCK INDEX OPTIONS - Each Portfolio may purchase and write put and
call options on stock indexes listed on U.S. securities exchanges or traded
in the over-the-counter market. A stock index fluctuates with changes in
the market values of the stocks included in the index.
The effectiveness of purchasing or writing stock index options will
depend upon the extent to which price movements in the Portfolio's
investments correlate with price movements of the stock index selected. Because
the value of an index option depends upon movements in the level
of the index rather than the price of a particular stock, whether a
Portfolio will realize a gain or loss from the purchase or writing of
options on an index depends upon movements in the level of stock prices in
the stock market generally or, in the case of certain indexes, in an
industry or market segment, rather than movements in the price of a
particular stock. Accordingly, successful use by each Portfolio of options
on stock indexes will be subject to The Dreyfus Corporation's ability to predict
correctly movements in the direction of the stock market
generally or of a particular industry. This requires different skills and
techniques than predicting changes in the price of individual stocks.
When a Portfolio writes an option on a stock index, the Portfolio will place
in a segregated account with its custodian or sub-custodian cash or liquid
securities in an amount at least equal to the market value of the underlying
stock index and will maintain the account while the option is
open or otherwise will cover the transaction.
FUTURES TRANSACTIONS - IN GENERAL - The Fund is not a commodity pool.
However, as a substitute for a comparable market position in the
underlying securities and for hedging purposes, each Portfolio may engage
in futures and options on futures transactions as described below.
Each Portfolio may trade futures contracts and options on futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade and
the International Monetary Market of the Chicago Mercantile Exchange, or,
to the extent permitted under applicable law, on exchanges located
outside the United States, such as the London International Financial
Futures Exchange and the Sydney Futures Exchange Limited. Foreign
markets may offer advantages, such as trading in commodities that are
not currently traded in the United States or arbitrage possibilities, not
available in the United States. Foreign markets, however, may have
greater risk potential than domestic markets. See "Risk Factors - Foreign
Commodity Transactions" below.
Each Portfolio's commodities transactions must constitute bona fide
hedging or other permissible transactions pursuant to regulations
promulgated by the Commodity Futures Trading Commission (the "CFTC").
In addition, a Portfolio may not engage in such transactions if the sum of
the amount of initial margin deposits and premiums paid for unexpired
commodity options, other than for bona fide hedging transactions, would
exceed 5% of the liquidation value of the Portfolio's assets, after taking
into account unrealized profits and unrealized losses on such contracts it
has entered into; provided, however, that in the case of an option that is in-
the-money at the time of purchase, the in-the money amount may be
excluded in calculating the 5%. Pursuant to regulations and/or published
positions of the Securities and Exchange Commission, each Portfolio may
be required to segregate cash or high quality money market instruments in
connection with its commodities transactions in an amount generally
equal to the value of the underlying commodity.
Initially, when purchasing or selling futures contracts a Portfolio will
be required to deposit with the Fund's custodian in the broker's name an
amount of cash or cash equivalents up to approximately 10% of the
contract amount. This amount is subject to change by the exchange or
board of trade on which the contract is traded and members of such
exchange or board of trade may impose their own higher requirements.
This amount is known as "initial margin" and is in the nature of a
performance bond or good faith deposit on the contract which is returned
to the Portfolio upon termination of the futures position, assuming all
contractual obligations have been satisfied. Subsequent payments, known
as "variation margin," to and from the broker will be made daily as the
price of the index or securities underlying the futures contract fluctuates,
making the long and short positions in the futures contract more or less
valuable, a process known as "marking-to-market." At any time prior to
the expiration of a futures contract, the Portfolio may elect to close the
position by taking an opposite position at the then prevailing price, which will
operate to terminate the Portfolio's existing position in the contract.
6
Although each Portfolio intends to purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be
given that a liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit the
amount of fluctuation permitted in futures contract prices during a single
trading day. Once the daily limit has been reached in a particular contract,
no trades may be made that day at a price beyond the limit or trading may
be suspended for specified periods during the trading day. Futures contract
prices could move to the limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and potentially subjecting a Portfolio to substantial losses. If it is not
possible or the Portfolio determines not to close a futures position
in anticipation of adverse price movements, the Portfolio will be required
to make daily cash payments of variation margin. In such circumstances,
an increase in the value of the portion of a Portfolio's securities being
hedged, if any, may offset partially or completely losses on the futures
contract. However, no assurance can be given that the price of the
securities being hedged will correlate with the price movements in a
futures contract and thus provide an offset to losses on the futures
contract.
In addition, to the extent a Portfolio is engaging in a futures
transaction as a hedging device, due to the risk of an imperfect
correlation between securities owned by the Portfolio that are the
subject of a hedging transaction and the futures contract used as a
hedging device, it is possible that the hedge will not be fully effective in
that, for example, losses on the portfolio securities may be in excess of
gains on the futures contract or losses on the futures contract may be in excess
of gains on the portfolio securities that were the subject of the
hedge. In futures contracts based on indexes, the risk of imperfect
correlation increases as the composition of a Portfolio's securities vary
from the composition of the index. In an effort to compensate for the
imperfect correlation of movements in the price of the securities being
hedged and movements in the price of futures contracts, the Portfolio may
buy or sell futures contracts in a greater or lesser dollar amount than the
dollar amount of the securities being hedged if the historical volatility of the
futures contract has been less or greater than that of the securities. Such
"over hedging" or "under hedging" may adversely affect a Portfolio's
net investment results if market movements are not as anticipated when
the hedge is established.
Successful use of futures by a Portfolio also is subject to The Dreyfus
Corporation's ability to predict correctly movements in the direction of
the market or interest rates. For example, if a Portfolio has hedged
against the possibility of a decline in the market adversely affecting the value
of securities held in its portfolio and prices increase instead, the Portfolio
will lose part or all of the benefit of the increased value of securities which
it has hedged because it will have offsetting losses in
its futures positions. In addition, in such situations, if the Portfolio has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may, but will not
necessarily, be at increased prices which reflect the rising market. The
Portfolio may have to sell securities at a time when it may be
disadvantageous to do so.
An option on a futures contract gives the purchaser the right, in return for
the premium paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of the
option is required upon exercise to assume an offsetting futures position (a
short position if the option is a call and a long position if the option is a
put). Upon exercise of the option, the assumption of offsetting futures
positions by the writer and holder of the option will be accompanied by delivery
of the accumulated cash balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract.
Call options sold by a Portfolio with respect to futures contracts will
be covered by, among other things, entering into a long position in the
same contract at a price no higher than the strike price of the call option,
or by ownership of the instruments underlying, or instruments the prices
of which are expected to move relatively consistently with the
instruments underlying, the futures contract. Put options sold by a
Portfolio with respect to futures contracts will be covered in the same
manner as put options on specific securities as described above.
7
STOCK INDEX FUTURES AND OPTIONS ON STOCK INDEX FUTURES - Each
Portfolio may purchase and sell stock index futures contracts and options
on stock index futures contracts.
A stock index future obligates the seller to deliver (and the purchaser
to take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is
made. No physical delivery of the underlying stocks in the index is made.
With respect to stock indexes that are permitted investments, each
Portfolio intends to purchase and sell futures contracts on the stock index
for which it can obtain the best price with consideration also given to
liquidity.
Each Portfolio may use index futures as a substitute for a comparable market
position in the underlying securities.
The price of stock index futures may not correlate perfectly with the
movement in the stock index because of certain market distortions. First,
all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which would distort the normal relationship between the
index and futures markets. Secondly, from the point of view of
speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market also may
cause temporary price distortions.
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON INTEREST RATE
FUTURES CONTRACTS - Each Portfolio may invest in interest rate futures contracts
and options on interest rate futures contracts as a substitute
for a comparable market position and to hedge against adverse movements
in interest rates.
To the extent a Portfolio has invested in interest rate futures contracts or
options on interest rate futures contracts as a substitute for a
comparable market position, the Portfolio will be subject to the
investment risks of having purchased the securities underlying the
contract.
Each Portfolio may purchase call options on interest rate futures
contracts to hedge against a decline in interest rates and may purchase
put options on interest rate futures contracts to hedge its portfolio securities
against the risk of rising interest rates.
Each Portfolio may sell call options on interest rate futures contracts
to partially hedge against declining prices of its portfolio securities. If
the futures price at expiration of the option is below the exercise price,
the Portfolio will retain the full amount of the option premium which
provides a partial hedge against any decline that may have occurred in
such Portfolio's holdings. Each Portfolio may sell put options on interest
rate futures contracts to hedge against increasing prices of the securities
which are deliverable upon exercise of the futures contract. If the futures
price at expiration of the option is higher than the exercise price, the
Portfolio will retain the full amount of the option premium which
provides a partial hedge against any increase in the price of securities
which the Portfolio intends to purchase. If a put or call option sold by a
Portfolio is exercised, the Portfolio will incur a loss which will be
reduced by the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its portfolio securities and
changes in the value of its futures positions, a Portfolio's losses from
existing options on futures may to some extent be reduced or increased by
changes in the value of its portfolio securities.
Each Portfolio also may sell options on interest rate futures contracts
as part of closing purchase transactions to terminate its options
positions. No assurance can be given that such closing transactions can be
effected or that there will be a correlation between price movements in
the options on interest rate futures and price movements in a Portfolio's
securities which are the subject of the hedge. In addition, a Portfolio's
purchase of such options will be based upon predictions as to anticipated
interest rate trends, which could prove to be inaccurate.
CURRENCY FUTURES AND OPTIONS ON CURRENCY FUTURES - Each Portfolio
may purchase and sell currency futures contracts and options thereon. See
"Call and Put Options on Specific Securities" above. By selling foreign currency
futures, the Portfolio can establish the number of U.S. dollars it will receive
in the delivery month for a certain amount of a foreign currency. In this way,
if the Portfolio anticipates a decline of a foreign
8
currency against the U.S. dollar, the Portfolio can attempt to fix the U.S.
dollar value of some or all of its securities that are denominated in that
currency. By purchasing foreign currency futures, the Portfolio can
establish the number of U.S. dollars it will be required to pay for a
specified amount of a foreign currency in the delivery month. Thus, if the
Portfolio intends to buy securities in the future and expects the U.S. dollar to
decline against the relevant foreign currency during the period before
the purchase is effected, the Portfolio, for the price of the currency
future, can attempt to fix the price in U.S. dollars of the securities it
intends to acquire.
The purchase of options on currency futures will allow each Portfolio,
for the price of the premium it must pay for the option, to decide whether
or not to buy (in the case of a call option) or to sell (in the case of a put
option) a futures contract at a specified price at any time during the
period before the option expires. If the Portfolio, in purchasing an option, has
been correct in its judgment concerning the direction in which the
price of a foreign currency would move as against the U.S. dollar, it may
exercise the option and thereby take a futures position to hedge against
the risk it had correctly anticipated or close out the option position at a gain
that will offset, to some extent, currency exchange losses otherwise suffered by
the Portfolio. If exchange rates move in a way the Portfolio
did not anticipate, the Portfolio will have incurred the expense of the
option without obtaining the expected benefit. As a result, the Portfolio's
profits on the underlying securities transactions may be reduced or
overall losses incurred.
OPTIONS ON SWAPS - Each Portfolio may purchase cash-settled options on
equity index swaps in pursuit of its investment objective. Equity index
swaps involve the exchange by a Portfolio with another party of cash
flows based upon the performance of an index or a portion of an index of
securities which usually include dividends. A cash-settled option on a
swap gives the purchaser the right, but not the obligation, in return for
the premium paid, to receive an amount of cash equal to the value of the
underlying swap as of the exercise date. These options typically are
purchased in privately negotiated transactions from financial
institutions, including securities brokerage firms.
A Portfolio usually will enter into swap transactions on a net basis. In
so doing, the two payment streams are netted out, with the Portfolio
receiving or paying, as the case may be, only the net amount of the two
payments. If a Portfolio enters into a swap, it would maintain a
segregated account in the full amount accrued on a daily basis of the
Portfolio's obligations with respect to the swap. If there is a default by
the other party to such a transaction, the Portfolio will have contractual
remedies pursuant to the agreements related to the transaction.
The use of swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with
ordinary portfolio security transactions. There is no limit on the amount
of swap transactions that may be entered into by a Portfolio. These transactions
do not involve the delivery of securities or other underlying assets or
principal. Accordingly, the risk of loss with respect to swaps is limited to the
net amount of payments that a Portfolio is contractually obligated to make. If
the other party to a swap defaults, the Portfolio's risk of loss consists of the
net amount of payments that the Fund contractually is entitled to receive.
FUTURE DEVELOPMENTS - Each Portfolio may take advantage of
opportunities in the area of options and futures contracts and options on
futures contracts and any other derivative investment which are not
presently contemplated for use by the Fund or which are not currently
available but which may be developed, to the extent such opportunities are
both consistent with the Portfolio's investment objective and legally
permissible for the Portfolio. Before entering into such transactions or
making any such investment on behalf of a Portfolio, the Fund will provide
appropriate disclosure in its prospectus.
LENDING PORTFOLIO SECURITIES - From time to time, each Portfolio may
lend securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain
transactions. Such loans may not exceed 33-1/3% of the value of such Portfolio's
total assets. In connection with such loans, the Portfolio will receive
collateral consisting of cash, U.S. Government securities or irrevocable letters
of credit which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. Each Portfolio can
increase its income through the investment of such collateral. A Portfolio
engaging in the portfolio loan transaction continues to be entitled to payments
in amounts equal to the interest, dividends or other distributions payable on
the loaned security and receives interest on the amount of the loan.
9
Such loans will be terminable at any time upon specified notice. A Portfolio
might experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with the Portfolio.
CERTAIN PORTFOLIO SECURITIES
CONVERTIBLE SECURITIES - Each Portfolio may purchase convertible
securities, which are fixed-income securities, such as bonds or preferred stock,
which may be converted at a stated price within a specified period
of time into a specified number of shares of common stock of the same or
a different issuer. Convertible securities are senior to common stock in a
corporation's capital structure, but usually are subordinated to non-convertible
debt securities. While providing a fixed-income stream (generally higher in
yield than the income derivable from a common stock, but lower than that
afforded by a non-convertible debt security), a convertible security also
affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation of the common stock into which it is
convertible. The convertible securities in which each Portfolio may invest must
be rated at least Baa by Moody's Investors Service, Inc. ("Moody's") or at least
BBB by Standard & Poor's Corporation ("S&P") or, if unrated, deemed to be of
comparable quality by The Dreyfus Corporation. Convertible securities rated Baa
by Moody's or BBB by S&P are considered investment grade obligations which lack
outstanding investment characteristics and have speculative
characteristics as well.
In general, the market value of a convertible security is the higher of
its "investment value" (i.e., its value as a fixed-income security) or its
"conversion value" (i.e., the value of the underlying shares of common
stock if the security is converted). As a fixed-income security, the market
value of a convertible security generally increases when interest rates
decline and generally decreases when interest rates rise. However, the
price of a convertible security also is influenced by the market value of
the security's underlying common stock. Thus, the price of a convertible
security generally increases as the market value of the underlying stock
increases, and generally decreases as the market value of the underlying
stock declines. Investments in convertible securities generally entail less risk
than investments in the common stock of the same issuer.
U.S. GOVERNMENT SECURITIES - Each Portfolio may purchase securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, which include U.S. Treasury securities that differ in
their interest rates, maturities and times of issuance. Treasury Bills have
initial maturities of one year or less; Treasury Notes have initial
maturities of one to ten years; and Treasury Bonds generally have initial
maturities of greater than ten years. Some obligations issued or
guaranteed by U.S. Government agencies and instrumentalities, for
example, Government National Mortgage Association pass-through
certificates, are supported by the full faith and credit of the U.S.
Treasury; others, such as those of the Federal Home Loan Banks, by the
right of the issuer to borrow from the U.S. Treasury; others, such as those
issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the
agency or instrumentality; and others, such as those issued by the Student
Loan Marketing Association, only by the credit of the agency or instrumentality.
These securities bear fixed, floating or variable rates of interest. Principal
and interest may fluctuate based on generally recognized reference rates or the
relationship of rates. While the U.S. Government provides financial support to
such U.S. Government-sponsored agencies or instrumentalities, no assurance can
be given that it will always do so, because the U.S. Government is not obligated
to do so by law.
ZERO COUPON SECURITIES - Each Portfolio may invest in zero coupon U.S. Treasury
securities, which are Treasury Notes and Bonds that have been
stripped of their unmatured interest coupons, the coupons themselves and
receipts or certificates representing interests in such stripped debt
obligations and coupons. Each Portfolio also may invest in zero coupon
securities issued by corporations and financial institutions which
constitute a proportionate ownership of the issuer's pool of underlying
U.S. Treasury securities. A zero coupon security pays no interest to its
holder during its life and is sold at a discount to its face value at
maturity. The amount of the discount fluctuates with the market price of
the security. The market prices of zero coupon securities generally are
more volatile than the market prices of securities that pay interest
periodically and are likely to respond to a greater degree to changes in
interest rates than non-zero coupon securities having similar maturities
and credit qualities.
10
BANK OBLIGATIONS - Each Portfolio may purchase certificates of deposit,
time deposits, bankers' acceptances and other short-term obligations of domestic
banks, foreign subsidiaries of domestic banks, foreign branches
of domestic banks, and domestic and foreign branches of foreign banks,
domestic savings and loan associations and other banking institutions.
With respect to such securities issued by foreign branches of domestic
banks, foreign subsidiaries of domestic banks, and domestic and foreign branches
of foreign banks, the Fund may be subject to additional
investment risks that are different in some respects from those incurred
by a fund which invests only in debt obligations of U.S. domestic issuers. Such
risks include possible future political and economic developments,
the possible imposition of foreign withholding taxes on interest income
payable on the securities, the possible establishment of exchange controls
or the adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on these securities
and the possible seizure or nationalization of foreign deposits.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits which may be held by each Portfolio will not benefit from
insurance from the Bank Insurance Fund or the Savings Association
Insurance Fund administered by the Federal Deposit Insurance Corporation.
No Portfolio will invest more than 15% of the value of its net assets in
time deposits that are illiquid and in other illiquid securities.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face amount
of the instrument upon maturity. The other short-term obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
REPURCHASE AGREEMENTS - Repurchase agreements involve the
acquisition by a Portfolio of an underlying debt instrument, subject to an
obligation of the seller to repurchase, and the Portfolio to resell, the
instrument at a fixed price, usually not more than one week after its
purchase. The Fund's custodian or subcustodian will have custody of, and
will hold in a segregated account, securities acquired by a Portfolio under
a repurchase agreement. Repurchase agreements are considered by the
staff of the Securities and Exchange Commission to be loans by the
Portfolio which enters into them. In an attempt to reduce the risk of
incurring a loss on a repurchase agreement, a Portfolio will enter into
repurchase agreements only with domestic banks with total assets in
excess of $1 billion or primary government securities dealers reporting to
the Federal Reserve Bank of New York, with respect to securities of the
type in which the Portfolio may invest, and will require that additional
securities be deposited with it if the value of the securities purchased
should decrease below resale price. The Dreyfus Corporation will monitor
on an ongoing basis the value of the collateral to assure that it always
equals or exceeds the repurchase price. Certain costs may be incurred in
connection with the sale of the securities if the seller does not
repurchase them in accordance with the repurchase agreement. In addition,
if bankruptcy proceedings are commenced with respect to the seller of the
securities, realization on the securities by the Portfolio may be delayed
or limited. The Fund will consider on an ongoing basis the
creditworthiness of the institutions with which a Portfolio enters into
repurchase agreements.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS -
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs. The commercial paper
purchased by a Portfolio will consist only of direct obligations which, at
the time of their purchase, are (a) rated not lower than Prime-1 by
Moody's, A-1 by S&P, F-1 by Fitch Investors Service, Inc. ("Fitch") or
Duff-1 by Duff & Phelps, Inc. ("Duff"), (b) issued by companies having an
outstanding unsecured debt issue currently rated not lower than Aa3 by
Moody's or AA- by S&P, Fitch or Duff, or (c) if unrated, determined by The
Dreyfus Corporation to be of comparable quality to those rated obligations which
may be purchased by the Portfolio. Each Portfolio may purchase
floating and variable rate demand notes and bonds, which are obligations
ordinarily having stated maturities in excess of one year, but which
permit the holder to demand payment of principal at any time or at
specified intervals. Variable rate demand notes include variable amount
11
master demand notes, which are obligations that permit the Portfolios to
invest fluctuating amounts at varying rates of interest pursuant to direct
arrangements between the Fund, as lender, and the borrower. These notes
permit daily changes in the amounts borrowed. As mutually agreed
between the parties, the Fund may increase the amount under the notes at
any time up to the full amount provided by the note agreement, or decrease
the amount, and the borrower may repay up to the full amount of the note without
penalty. Because these obligations are direct lending
arrangements between the lender and borrower, it is not contemplated
that such instruments generally will be traded, and there generally is no
established secondary market for these obligations, although they are redeemable
at face value, plus accrued interest, at any time. Accordingly, where these
obligations are not secured by letters of credit or other
credit support arrangements, the Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. In
connection with floating and variable rate demand obligations, The
Dreyfus Corporation will consider, on an ongoing basis, earning power,
cash flow and other liquidity ratios of the borrower, and the borrower's ability
to pay principal and interest on demand. Such obligations
frequently are not rated by credit rating agencies, and the Portfolios may
invest in them only if at the time of an investment the borrower meets
the criteria set forth above for other commercial paper issuers.
WARRANTS - Each Portfolio may invest up to 5% of its net assets in
warrants, except that this limitation does not apply to warrants acquired
in units or attached to securities. A warrant is an instrument issued by a
corporation which gives the holder the right to subscribe to a specified
amount of the corporation's capital stock at a set price for a specified
period of time.
ILLIQUID SECURITIES - Each Portfolio may invest up to 15% of the value of
its net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Portfolio's
investment objective. Such securities may include securities that are not
readily marketable, such as certain securities that are subject to legal or
contractual restrictions on resale and repurchase agreements providing
for settlement in more than seven days after notice. As to these
securities, a Portfolio is subject to a risk that should the Fund desire to sell
them when a ready buyer is not available at a price the Fund deems
representative of their value, the value of the Portfolio's net assets could
be adversely affected. However, if a substantial market of qualified
institutional buyers develops pursuant to Rule 144A under the Securities
Act of 1933, as amended, for certain of these securities held by the Fund,
the Fund intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board of Directors.
Because it is not possible to predict with assurance how the market for
restricted securities pursuant to Rule 144A will develop, the Fund's Board
of Directors has directed The Dreyfus Corporation to monitor carefully
each Portfolio's investments in such securities with particular regard to
trading activity, availability of reliable price information and other
relevant information. To the extent that, for a period of time, qualified
institutional buyers cease purchasing such restricted securities pursuant
to Rule 144A, the Portfolio investing in such securities may have the
effect of increasing the level of illiquidity in such Portfolio's
investments during such period.
CERTAIN FUNDAMENTAL POLICIES
Each Portfolio may (i) borrow money to the extent permitted under the
Investment Company Act of 1940; (ii) invest up to 5% of its total assets
in the obligations of any issuer, except that up to 25% of the value of its
total assets may be invested, and securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities may be purchased,
without regard to any such limitation; and (iii) invest up to 25% of its
total assets in the securities of issuers in a single industry, provided that
there shall be no such limitation on investments in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. This
paragraph describes fundamental policies that cannot be changed as to a
Portfolio without approval by the holders of a majority (as defined in the
Investment Company Act of 1940) of such Portfolio's outstanding voting
shares. See "Investment Objective and Management Policies - Investment
Restrictions" in the Fund's Statement of Additional Information.
12
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES
Each Portfolio may (i) purchase securities of any company having less
than three years' continuous operation (including operations of any
predecessors) if such purchase does not cause the value of such
Portfolio's investments in all such companies to exceed 5% of the value of
its total assets; (ii) pledge, hypothecate, mortgage or otherwise encumber
its assets, but only to secure permitted borrowings; and (iii) invest up to
15% of the value of its net assets in repurchase agreements providing for
settlement in more than seven days after notice and in other illiquid
securities. See "Investment Objective and Management Policies -
Investment Restrictions" in the Fund's Statement of Additional
Information.
RISK FACTORS
INVESTING IN FOREIGN SECURITIES - Foreign securities markets generally
are not as developed or efficient as those in the United States. Securities
of some foreign issuers are less liquid and more volatile than securities
of comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States. The issuers of
some of these securities, such as foreign bank obligations, may be subject
to less stringent or different regulations than are U.S. issuers. In addition,
there may be less publicly available information about a non-U.S. issuer,
and non-U.S. issuers generally are not subject to uniform accounting and
financial reporting standards, practices and requirements comparable to
those applicable to U.S. issuers.
Because stock certificates and other evidences of ownership of such
securities usually are held outside the United States, each Portfolio will
be subject to additional risks which include possible adverse political and
economic developments, possible seizure or nationalization of foreign
deposits and possible adoption of governmental restrictions that might adversely
affect the payment of principal, interest and dividends on the foreign
securities or might restrict the payment of principal, interest and dividends to
investors located outside the country of the issuers, whether
from currency blockage or otherwise. Custodial expenses for a portfolio of non-
U.S. securities generally are higher than for a portfolio of U.S. securities.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in
currency rates and exchange control regulations. Some currency exchange
costs may be incurred when the Portfolios change investments from one
country to another.
Furthermore, some of these securities may be subject to brokerage
taxes levied by foreign governments, which have the effect of increasing
the cost of such investment and reducing the realized gain or increasing
the realized loss on such securities at the time of sale. Income received
by the Portfolios from sources within foreign countries may be reduced by
withholding or other taxes imposed by such countries. Tax conventions
between certain countries and the United States, however, may reduce or
eliminate such taxes. All such taxes paid by a Portfolio will reduce its net
income available for distribution to investors.
FOREIGN CURRENCY EXCHANGE - Currency exchange rates may fluctuate
significantly over short periods of time. They generally are determined by
the forces of supply and demand in the foreign exchange markets and the relative
merits of investments in different countries, actual or perceived changes in
interest rates and other complex factors, as seen from an international
perspective. Currency exchange rates also can be affected unpredictably by
intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad.
The foreign currency market offers less protection against defaults in
the forward trading of currencies than is available when trading in
currencies occurs on an exchange. Since a forward currency contract is not
guaranteed by an exchange or clearinghouse, a default on the contract
would deprive a Portfolio of unrealized profits or force a Portfolio to
cover its commitments for purchase or resale, if any, at the current
market price.
FOREIGN COMMODITY TRANSACTIONS - Unlike trading on domestic
commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal
markets so that no common clearing
13
facility exists and a trader may look only to the broker for performance of the
contract. In addition, unless a Portfolio hedges against fluctuations in the
exchange rate between the U.S. dollar and the currencies in which trading is
done on foreign exchanges, any profits that the Portfolio might realize in
trading could be eliminated by adverse changes in the exchange rate, or the
Portfolio could incur losses as a result of those changes. Transactions on
foreign exchanges may include both commodities which are traded on domestic
exchanges and those which are not.
OTHER INVESTMENT CONSIDERATIONS - Each Portfolio's net asset value is
not fixed and should be expected to fluctuate. You should purchase
Portfolio shares only as a supplement to an overall investment program
and only if you are willing to undertake the risks involved.
Investors should be aware that equity securities fluctuate in value,
often based on factors unrelated to the value of the issuer of the
securities, and that fluctuations can be pronounced. Changes in the value
of a Portfolio's securities will result in changes in the value of such
Portfolio's shares and thus the Portfolio's yield and total return to investors.
The use of investment techniques such as leveraging, short-selling, engaging
in financial futures and options transactions, entering into
equity index swaps and options on swaps and lending portfolio securities
involves greater risk than that incurred by many other funds with similar
objectives. Using these techniques may produce higher than normal
portfolio turnover which usually generates additional brokerage
commissions and expenses. In addition, short-term gains realized from
portfolio transactions are taxable to shareholders as ordinary income. The
Fund's ability to engage in certain short-term transactions may be limited
by the requirement that, to qualify as a regulated investment company,
each Portfolio must earn less than 30% of its gross income from the
disposition of securities held for less than three months. This 30% test
limits the extent to which a Portfolio may sell securities held for less
than three months, write options expiring in less than three months and
invest in certain futures contracts, among other strategies. With
exception of the above requirement, the amount of investment activity
will not be a limiting factor when making investment decisions. Under
normal market conditions, a Portfolio's turnover rate generally will not
exceed 150%. See "Portfolio Transactions" in the Statement of Additional
Information.
Investment decisions for each Portfolio are made independently from
those of other investment companies advised by The Dreyfus Corporation.
However, if such other investment companies are prepared to invest in, or desire
to dispose of, securities of the type in which a Portfolio invests at the same
time as such Portfolio, available investments or opportunities
for sales will be allocated equitably to each. In some cases, this
procedure may adversely affect the size of the position obtained for or disposed
of by the Portfolio or the price paid or received by the Portfolio.
MANAGEMENT OF THE FUND
The Dreyfus Corporation, located at 200 Park Avenue, New York, New
York 10166, was formed in 1947 and serves as the Fund's investment
adviser. As of November 30, 1993, The Dreyfus Corporation managed or
administered approximately $78 billion in assets for more than 1.9
million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the
Fund, subject to the overall authority of the Fund's Board of Directors in
accordance with Maryland law. The primary investment officer of Dreyfus
Large Company Growth and Dreyfus Small Company Growth will be Howard
Stein, who has been Chief Executive Officer of The Dreyfus Corporation
since 1965. The primary investment officer of Dreyfus Large Company
Value and Dreyfus Small Company Value will be Ernest G. Wiggins, Jr.,
who, from 1992 to 1993, was President of Gabelli International. Prior
thereto, Mr. Wiggins held various positions with Fidelity Management and
Research Company. The Fund's other investment officers are identified
under "Management of the Fund" in the Fund's Statement of Additional
Information. The Dreyfus Corporation also provides research services for
the Fund as well as for other funds advised by The Dreyfus Corporation
through a professional staff of portfolio managers and security analysts.
14
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of .75 of 1%
of the value of each Portfolio's average daily net assets. The management
fee is higher than that paid by most other investment companies. From
time to time, The Dreyfus Corporation may waive receipt of its fees
and/or voluntarily assume certain expenses of a Portfolio, which would
have the effect of lowering the overall expense ratio of that Portfolio and
increasing yield to investors at the time such amounts are waived or
assumed, as the case may be. The Fund will not pay The Dreyfus
Corporation at a later time for any amounts it may waive, nor will the
Fund reimburse The Dreyfus Corporation for any amounts it may assume.
All expenses incurred in the operation of the Fund will be borne by the
Fund, except to the extent specifically assumed by The Dreyfus
Corporation. The expenses to be borne by the Fund will include:
organizational costs, taxes, interest, loan commitment fees, dividends and
interest paid on securities sold short, brokerage fees and commissions, if
any, fees of Directors who are not officers, directors, employees or
holders of 5% or more of the outstanding voting securities of The Dreyfus
Corporation, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of
maintaining corporate existence, costs of independent pricing services,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of shareholders' reports and
corporate meetings, costs of preparing and printing certain prospectuses
and statements of additional information, and any extraordinary expenses.
Expenses attributable to a particular Portfolio are charged against the
assets of that Portfolio; other expenses of the Fund are allocated among
the Portfolios on the basis determined by the Board of Directors,
including, but not limited to, proportionately in relation to the net assets
of each Portfolio.
In addition, the Fund is subject to an annual distribution fee for
advertising, marketing and distributing Portfolio shares and an annual
service fee for ongoing personal services relating to shareholder accounts
and services related to the maintenance of shareholder accounts. See
"Distribution Plan and Shareholder Services Plan."
The Dreyfus Corporation may pay Dreyfus Service Corporation for
shareholder and distribution services from its own monies, including past
profits but not including the management fee paid by the Fund. Dreyfus
Service Corporation may pay part or all of these payments to securities
dealers or others for servicing and distribution.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671, is the
Fund's Transfer and Dividend Disbursing Agent (the "Transfer Agent"). The
Bank of New York, 110 Washington Street, New York, New York 10286, is
the Fund's Custodian.
HOW TO BUY FUND SHARES
The Fund's distributor is Dreyfus Service Corporation, a wholly-owned
subsidiary of The Dreyfus Corporation located at 200 Park Avenue, New
York, New York 10166. The shares it distributes are not deposits or
obligations of The Dreyfus Security Savings Bank, F.S.B. and therefore are
not insured by the Federal Deposit Insurance Corporation.
You can purchase Portfolio shares through Dreyfus Service Corporation
or certain financial institutions, securities dealers and other industry
professionals (collectively, "Service Agents") that have entered into agreements
with Dreyfus Service Corporation. Stock certificates are
issued only upon your written request. No certificates are issued for fractional
shares. The Fund reserves the right to reject any purchase order.
Management understands that some Service Agents may impose certain
conditions on their clients which are different from those described in
this Prospectus, and, to the extent permitted by applicable regulatory
authority, may charge their clients direct fees which would be in addition
to any amounts which might be received under the Distribution Plan or
Shareholder Services Plan. Each Service Agent has agreed to transmit to
its clients a schedule of such fees. You should consult your Service Agent
in this regard.
The minimum initial investment is $2,500, or $1,000 if you are a client
of a Service Agent which has made an aggregate minimum initial purchase
for its customers of $2,500. Subsequent investments must be at
15
least $100. The initial investment must be accompanied by the Fund's Account
Application. For full-time or part-time employees of The Dreyfus Corporation or
any of its affiliates or subsidiaries, directors of The Dreyfus Corporation,
Board members of a fund advised by The Dreyfus Corporation, including members of
the Fund's Board, or the spouse or minor child of any of the foregoing, the
minimum initial investment is $1,000. For full-time or part-time employees of
The Dreyfus Corporation or any of its affiliates or subsidiaries who elect to
have a portion of their pay directly deposited into their Fund account, the
minimum initial investment is $50. The Fund reserves the right to offer
Portfolio shares without regard to minimum purchase requirements to employees
participating in certain qualified or non-qualified employee benefit plans
or other programs where contributions or account information can be
transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment minimum
requirements at any time.
You may purchase Portfolio shares by check or wire, or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made
payable to "The Dreyfus Family of Funds," or, if for Dreyfus retirement
plan accounts, to "The Dreyfus Trust Company, Custodian." Payments to
open new accounts which are mailed should be sent to The Dreyfus Family
of Funds, P.O. Box 9387, Providence, Rhode Island 02940-9387, together
with your Account Application. For subsequent investments, your Fund
account number should appear on the check and an investment slip should
be enclosed and sent to The Dreyfus Family of Funds, P.O. Box 105, Newark,
New Jersey 07101-0105. For Dreyfus retirement plan accounts, both
initial and subsequent investments should be sent to The Dreyfus Trust
Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427. Neither
initial nor subsequent investments should be made by third party
check. Purchase orders may be delivered in person only to a Dreyfus
Financial Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND
WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the
nearest Dreyfus Financial Center, please call one of the telephone numbers
listed under "General Information."
Wire payments may be made if your account is in a commercial bank
that is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, together with the applicable
Portfolio's DDA# as shown below, for purchase of shares in your name:
DDA# 8900088125/Dreyfus Focus Funds, Inc./Dreyfus Large Company Growth
DDA# 8900088133/Dreyfus Focus Funds, Inc./Dreyfus Large Company Value
DDA# 8900088141/Dreyfus Focus Funds, Inc./Dreyfus Small Company Growth
DDA# 8900088168/Dreyfus Focus Funds, Inc./Dreyfus Small Company Value
The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead),
account registration and dealer number, if applicable. If your initial
purchase of Portfolio shares is by wire, please call 1-800-645-6561
after completing your wire payment to obtain your Fund account number.
Please include your Fund account number on the Fund's Account Application
and promptly mail the Account Application to the Fund, as no redemptions
will be permitted until the Account Application is received. You may
obtain further information about remitting funds in this manner from your
bank. All payments should be made in U.S. dollars and, to avoid fees and delays,
should be drawn only on U.S. banks. A charge will be imposed if any check used
for investment in your account does not clear. The Fund makes available to
certain large institutions the ability to issue purchase instructions through
compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct
the institution to transmit immediately available funds through the
Automated Clearing House to The Bank of New York with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and your Fund account number PRECEDED BY THE DIGITS "1111."
Shares of each Portfolio are sold on a continuous basis at net asset
value per share next determined after
16
an order in proper form is received
by the Transfer Agent or other agent. Net asset value per share is
determined as of the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time), on each day the New York
Stock Exchange is open for business. For purposes of determining net asset
value, options and futures contracts will be valued 15 minutes after the
close of trading on the floor of the New York Stock Exchange. Net asset
value per share is computed by dividing the value of the Portfolio's net
assets (i.e., the value of its assets less liabilities) by the total number of
such Portfolio's shares outstanding. Each Portfolio's investments are
valued based on market value or, where market quotations are not readily
available, based on fair value as determined in good faith by the Fund's
Board of Directors. For further information regarding the methods
employed in valuing the Portfolios' investments, see "Determination of
Net Asset Value" in the Fund's Statement of Additional Information.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes"
and the Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject
you to a $50 penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE
You may purchase Portfolio shares (minimum $500, maximum $150,000
per day) by telephone if you have checked the appropriate box and supplied
the necessary information on the Fund's Account Application or have filed
an Optional Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these
documents and your Fund account. Only a bank account maintained in a
domestic financial institution which is an Automated Clearing House
member may be so designated. The Fund may modify or terminate this
Privilege at any time or charge a service fee upon notice to shareholders.
No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase by telephoning 1-800-221-
4060 or, if you are calling from overseas, call 1-401-455-3306.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Service Agents and some Service Agents
may impose certain conditions on their clients which are different from
those in this Prospectus. You should consult your Service Agent in this regard.
EXCHANGE PRIVILEGE
The Exchange Privilege enables you to purchase, in exchange for shares
of a Portfolio, shares in one of the other Portfolios or shares of certain other
funds managed or administered by The Dreyfus Corporation, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to
you. The exchange privilege may be exercised twice during the calendar
year as described below. If you desire to use this Privilege, you should consult
your Service Agent or Dreyfus Service Corporation to determine if
it is available and whether any other conditions are imposed on its use.
To use this Privilege, you must give exchange instructions to the
Transfer Agent in writing, by wire or by telephone. If you previously have
established the Telephone Exchange Privilege, you may telephone exchange
instructions by calling 1-800-221-4060 or, if you are calling from
overseas, call 1-401-455-3306. See "How to Redeem Fund Shares -
Procedures." Before any exchange, you must obtain and should review a
copy of the current prospectus of the fund into which the exchange is
being made. Prospectuses may be obtained from Dreyfus Service
Corporation. Except in the case of Personal Retirement Plans, the shares
being exchanged must have a current value of at least $500; furthermore,
when establishing a new account by exchange, the shares being exchanged
must have a value of at least the minimum initial investment required for
the fund into which the exchange is being made. Telephone exchanges may
be made only if the appropriate "YES" box has been checked on the Account
Application, or a separate signed Optional Services Form is on file with
the Transfer Agent. Upon an exchange into a new account, the following
shareholder services and privileges, as
17
applicable and where available, will be automatically carried over to the fund
into which the exchange is made: Exchange Privilege, Wire Redemption Privilege,
Telephone Redemption Privilege, Dreyfus TELETRANSFER Privilege and the
dividend/capital gain distribution option (except for the Dreyfus Dividend Sweep
Privilege) selected by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales load
or which reflect a reduced sales load, if the shares of the fund from which you
are exchanging were: (a) purchased with a sales load, (b) acquired by a
previous exchange from shares purchased with a sales load,
or (c) acquired through reinvestment of dividends or distributions paid
with respect to the foregoing categories of shares. To qualify, at the time
of your exchange you must notify the Transfer Agent or your Service Agent
must notify Dreyfus Service Corporation. Any such qualification is subject
to confirmation of your holdings through a check of appropriate records.
See "Shareholder Services" in the Statement of Additional Information. No
fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the Securities and Exchange Commission. The
Fund reserves the right to reject any exchange request in whole or in part. The
Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
The exchange of shares of one fund for shares of another is treated for
Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a semi-
monthly, monthly, quarterly or annual basis), in exchange for shares
of a Portfolio, in shares of one of the other Portfolios or shares of certain
other funds in the Dreyfus Family of Funds of which you are currently an
investor. The amount you designate, which can be expressed either in
terms of a specific dollar or share amount ($100 minimum), will be
exchanged automatically on the first and/or fifteenth day of the month according
to the schedule you have selected. Shares will be exchanged at
the then-current net asset value; however, a sales load may be charged
with respect to exchanges into funds sold with a sales load. See
"Shareholder Services" in the Statement of Additional Information. The
right to exercise this Privilege may be modified or canceled by the Fund or
the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The
Fund may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. The exchange of shares of one fund for shares
of another is treated for Federal income tax purposes as a sale of the
shares given in exchange by the shareholder and, therefore, an exchanging
shareholder may realize a taxable gain or loss. For more information
concerning this Privilege and the funds in the Dreyfus Family of Funds
eligible to participate in this Privilege, or to obtain a Dreyfus Auto-
Exchange Authorization Form, please call toll free 1-800-645-6561. DREYFUS-
AUTOMATIC ASSET BUILDER
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Portfolio
shares (minimum of $100 and maximum of $150,000 per transaction) at
regular intervals selected by you. Portfolio shares are purchased by
transferring funds from the bank account designated by you. At your
option, the account designated by you will be debited in the specified
amount, and Portfolio shares will be purchased, once a month, on either
the first or fifteenth day, or twice a month, on both days. Only an account
maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. To establish a Dreyfus-
AUTOMATIC Asset Builder account, you must file an authorization form
with the Transfer Agent. You may obtain the necessary authorization form
from Dreyfus Service Corporation. You may cancel your participation in
this Privilege or change the amount of purchase at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671, or, if for Dreyfus retire-
18
ment plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427,
Providence, Rhode Island 02940-6427, and the notification will be
effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Portfolio shares (minimum of $100 and maximum of $50,000 per
transaction) by having Federal salary, Social Security, or certain
veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much
of such payments as you elect. To enroll in Dreyfus Government Direct
Deposit, you must file with the Transfer Agent a completed Direct Deposit Sign-
Up Form for each type of payment that you desire to include in the Privilege.
The appropriate form may be obtained from Dreyfus Service Corporation. Death or
legal incapacity will terminate your participation in this Privilege. You may
elect at any time to terminate your participation
by notifying in writing the appropriate Federal agency. Further, the Fund
may terminate your participation upon 30 days' notice to you.
DREYFUS DIVIDEND SWEEP PRIVILEGE
Dreyfus Dividend Sweep Privilege enables you to invest automatically
dividends or dividends and capital gain distributions, if any, paid by a
Portfolio in shares of another Portfolio of the Fund or shares of another
fund in the Dreyfus Family of Funds of which you are a shareholder. Shares
of the other fund will be purchased at the then-current net asset value;
however, a sales load may be charged with respect to investments in
shares of a fund sold with a sales load. If you are investing in a fund that
charges a sales load, you may qualify for share prices which do not include
the sales load or which reflect a reduced sales load. If you are investing in
a fund that charges a contingent deferred sales charge, the shares
purchased will be subject on redemption to the contingent deferred sales charge,
if any, applicable to the purchased shares. See "Shareholder
Services" in the Statement of Additional Information. For more
information concerning this Privilege and the funds in the Dreyfus Family
of Funds eligible to participate in this Privilege, or to request a Dividend
Sweep Authorization Form, please call toll free 1-800-645-6561. You may
cancel this Privilege by mailing written notification to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To
select a new fund after cancellation, you must submit a new authorization
form. Enrollment in or cancellation of this Privilege is effective three
business days following receipt. This Privilege is available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply. The Fund may modify or terminate
this Privilege at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement
plans are not eligible for this Privilege.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Portfolio shares
(minimum of $100 per transaction) automatically on a regular basis.
Depending upon your employer's direct deposit program, you may have part
or all of your paycheck transferred to your existing Dreyfus account
electronically through the Automated Clearing House system at each pay
period. To establish a Dreyfus Payroll Savings Plan account, you must file
an authorization form with your employer's payroll department. Your
employer must complete the reverse side of the form and return it to The Dreyfus
Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-
9671. You may obtain the necessary authorization form from Dreyfus
Service Corporation. You may change the amount of purchase or cancel the
authorization only by written notification to your employer. It is the sole
responsibility of your employer, not Dreyfus Service Corporation, The
Dreyfus Corporation, the Fund, the Transfer Agent or any other person, to
arrange for transactions under the Dreyfus Payroll Savings Plan. The Fund
may modify or terminate this Privilege at any time or charge a service
fee. No such fee currently is contemplated.
19
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. An application for the
Automatic Withdrawal Plan can be obtained from Dreyfus Service
Corporation. There is a service charge of 50 cents for each withdrawal
check. The Automatic Withdrawal Plan may be ended at any time by you,
the Fund or the Transfer Agent. Shares for which certificates have been
issued may not be redeemed through the Automatic Withdrawal Plan.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans, including
Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k) Salary Reduction
Plans and 403(b)(7) Plans. Plan support services also are
available. For details, please contact Dreyfus Group Retirement Plans, a
division of Dreyfus Service Corporation, by calling toll free 1-800-358-5566.
HOW TO REDEEM FUND SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below.
When a request is received in proper form, the Fund will redeem the
shares at the next determined net asset value.
The Fund imposes no charges when shares are redeemed directly through
Dreyfus Service Corporation. Service Agents may charge a nominal fee for
effecting redemptions of Portfolio shares. Any certificates representing
Portfolio shares being redeemed must be submitted with the redemption
request. The value of the shares redeemed may be more or less than their
original cost, depending upon the Portfolio's then-current net asset value. The
Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in proper
form, except as provided by the rules of the Securities and
Exchange Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY
CHECK, BY DREYFUS TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-
AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE
OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR
DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT
BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT REQUESTS
TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER
RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS
TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER
ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE
PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE
IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME
ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE
AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER
RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until
the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if your account's net asset value is
$500 or less and remains so during the notice period.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, through the Wire Redemption Privilege,
through the Telephone Redemption Privilege, or through the Dreyfus
TELETRANSFER Privilege. Other redemption procedures may be in effect
for clients of certain Service Agents. The Fund makes available to certain large
clients of certain compatible computer facilities.
20
In addition, Dreyfus Service Corporation will accept orders from
dealers with which it has sales agreements for the repurchase of shares
held by investors. Repurchase orders received by the dealer prior to the
close of trading on the floor of the New York Stock Exchange on any
business day and transmitted to Dreyfus Service Corporation prior to the
close of its business day (normally 5:15 p.m., New York time) are effected
at the price determined as of the close of trading on the floor of the New
York Stock Exchange on that day. Otherwise, the shares will be redeemed
at the next determined net asset value. It is the responsibility of the
dealer to transmit orders on a timely basis. The dealer may charge the
investor a fee for executing the order. This repurchase arrangement is
discretionary and may be withdrawn at any time.
You may redeem or exchange shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed an
Optional Services Form with the Transfer Agent. If you select a telephone
redemption or exchange privilege, you authorize the Transfer Agent to act
on telephone instructions from any person representing himself or herself
to be you, or a representative of your Service Agent, and reasonably
believed by the Transfer Agent to be genuine. The Fund will require the Transfer
Agent to employ reasonable procedures, such as requiring a form
of personal identification, to confirm that instructions are genuine and, if
it does not follow such procedures, the Fund or the Transfer Agent may be liable
for any losses due to unauthorized or fraudulent instructions.
Neither the Fund nor the Transfer Agent will be liable for following
telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of a Portfolio's shares. In such cases,
you should consider using the other redemption procedures described
herein. Use of these other redemption procedures may result in your
redemption request being processed at a later time than it would have
been if telephone redemption had been used. During the delay, such
Portfolio's net asset value may fluctuate.
REGULAR REDEMPTION - Under the regular redemption procedure, you may
redeem shares by written request mailed to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671. Redemption requests
may be delivered in person only to a Dreyfus Financial Center. THESE
REQUESTS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY
UPON RECEIPT THEREBY. For the location of the nearest Dreyfus Financial
Center, please call one of the telephone numbers listed under "General
Information." Redemption requests must be signed by each shareholder, including
each owner of a joint account, and each signature must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be accepted
from domestic banks, brokers, dealers, credit unions, national securities
exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the
New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. If you have any questions with respect to signature-
guarantees, please call one of the telephone numbers listed under "General
Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written signature-
guaranteed request.
WIRE REDEMPTION PRIVILEGE - You may request by wire or telephone that redemption
proceeds (minimum $1,000) be wired to your account at a bank
which is a member of the Federal Reserve System, or a correspondent bank
if your bank is not a member. To establish the Wire Redemption Privilege,
you must check the appropriate box and supply the necessary information
on the Fund's Account Application or file an Optional Services Form with
the Transfer Agent. You may direct that redemption proceeds be paid by
check (maximum $150,000 per day) made out to the owners of record and
mailed to your address. Redemption proceeds of less than $1,000 will be
paid automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of only up to $250,000 wired within any 30-day
period. You may telephone redemption requests by calling 1-800-221-4060 or, if
you are calling from overseas, call 1-401-455-3306. The Fund reserves the right
to refuse any redemption request, including requests made shortly after a change
of address, and may limit the amount involved or the number of such requests.
This Privilege may be modified or termi-
21
nated at any time by the Transfer Agent or the Fund. The Fund's Statement of
Additional Information sets forth instructions for transmitting redemption
requests by wire. Shares held under Keogh Plans, IRAs or other retirement plans,
and shares for which certificates have been issued, are not eligible for this
Privilege.
TELEPHONE REDEMPTION PRIVILEGE - You may redeem Fund shares
(maximum $150,000 per day) by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed an
Optional Services Form with the Transfer Agent. The redemption proceeds
will be paid by check and mailed to your address. You may telephone
redemption instructions by calling 1-800-221-4060 or, if you are calling
from overseas, call 1-401-455-3306. The Fund reserves the right to
refuse any request made by telephone, including requests made shortly
after a change of address, and may limit the amount involved or the
number of telephone redemption requests. This Privilege may be modified
or terminated at any time by the Transfer Agent or the Fund. Shares held
under Keogh Plans, IRAs or other retirement plans, and shares for which
certificates have been issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE - You may redeem shares (minimum
$500 per day) by telephone if you have checked the appropriate box and
supplied the necessary information on the Fund's Account Application or
have filed an Optional Services Form with the Transfer Agent. The
proceeds will be transferred between your Fund account and the bank
account designated in one of these documents. Only such an account
maintained in a domestic financial institution which is an Automated
Clearing House member may be so designated. Redemption proceeds will be
on deposit in your account at an Automated Clearing House member bank ordinarily
two days after receipt of the redemption request or, at your request, paid by
check (maximum $150,000 per day) and mailed to your
address. Holders of jointly registered Fund or bank accounts may redeem
through the Dreyfus TELETRANSFER Privilege for transfer to their bank
account only up to $250,000 within any 30-day period. The Fund reserves
the right to refuse any request made by telephone, including requests
made shortly after a change of address, and may limit the amount involved
or the number of such requests. The Fund may modify or terminate this
Privilege at any time or charge a service fee upon notice to shareholders.
No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption by telephoning 1-800-221-
4060 or, if you are calling from overseas, call 1-401-455-3306. Shares
held under Keogh Plans, IRAs or other retirement plans, and shares issued
in certificate form, are not eligible for this Privilege.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
Portfolio shares are subject to a Distribution Plan and a Shareholder
Services Plan.
DISTRIBUTION PLAN - Under the Distribution Plan, adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, the Fund pays
Dreyfus Service Corporation for advertising, marketing and distributing
Portfolio shares at an annual rate of .50 of 1% of the value of each Portfolio's
average daily net assets. Under the Distribution Plan, Dreyfus Service
Corporation may make payments to Service Agents in respect of
these services. Dreyfus Service Corporation determines the amounts to be
paid to Service Agents. Service Agents receive such fees in respect of the
average daily value of Portfolio shares owned by their clients. From time
to time, Dreyfus Service Corporation may defer or waive receipt of fees
under the Distribution Plan while retaining the ability to be paid by the
Fund under the Distribution Plan thereafter. The fees payable to Dreyfus Service
Corporation under the Distribution Plan for advertising, marketing
and distributing Portfolio shares and for payments to Service Agents are payable
without regard to actual expenses incurred.
The Fund bears the costs of preparing and printing prospectuses and
statements of additional information used for regulatory purposes and for
distribution to existing Fund shareholders. Under the Distribution Plan, the
Fund bears (a) the costs of preparing, printing and distributing
prospectuses and statements of additional information used for other
purposes and (b) the costs associated with implementing and operating the
Distribution Plan, the aggregate of such amounts not to exceed in any
fiscal year of the Fund the greater of $100,000 or .005 of 1% of the value
of each Portfolio's average daily net assets for such fiscal year.
22
SHAREHOLDER SERVICES PLAN - Under the Shareholder Services Plan, the
Fund pays Dreyfus Service Corporation for the provision of certain
services to Portfolio shareholders a fee at the annual rate of .25 of 1% of
the value of each Portfolio's average daily net assets. The services
provided may include personal services relating to shareholder accounts,
such as answering shareholder inquiries regarding the Fund and providing reports
and other information, and services related to the maintenance of shareholder
accounts. Dreyfus Service Corporation may make payments to
Service Agents in respect of these services. Dreyfus Service Corporation
determines the amounts to be paid to Service Agents. Each Service Agent
is required to disclose to its clients any compensation payable to it by the
Fund pursuant to the Shareholder Services Plan and any other
compensation payable by their clients in connection with the investment
of their assets in Portfolio shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under the Internal Revenue Code of 1986, as amended (the "Code"), each
Portfolio of the Fund is treated as a separate corporation for purposes of
qualification and taxation as a regulated investment company. Each
Portfolio ordinarily pays dividends from its net investment income and
distributes net realized securities gains, if any, once a year, but it may
make distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all events in a manner consistent with
the provisions of the Investment Company Act of 1940. The Fund will
not make distributions from net realized securities gains unless capital
loss carryovers, if any, have been utilized or have expired. You may choose
whether to receive dividends and distributions in cash or to reinvest in
additional shares at net asset value. All expenses are accrued daily and
deducted before declaration of dividends to investors.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and gains
from the sale or disposition of market discount bonds, paid by the
Portfolios will be taxable to U.S. shareholders as ordinary income whether
received in cash or reinvested in additional shares. Distributions from net
realized long-term securities gains of the Portfolios will be taxable to
U.S. shareholders as long-term capital gains for Federal income tax
purposes, regardless of how long shareholders have held their Portfolio
shares and whether such distributions are received in cash or reinvested
in Fund shares. The Code provides that the net capital gain of an individual
generally will not be subject to Federal income tax at a rate in excess of
28%. Dividends and distributions may be subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and gains
from the sale or disposition of market discount bonds, paid by the
Portfolios to a foreign investor generally are subject to U.S. nonresident
withholding taxes at the rate of 30%, unless the foreign investor claims
the benefit of a lower rate specified in a tax treaty. Distributions from
net realized long-term securities gains paid by the Portfolios to a foreign
investor as well as the proceeds of any redemptions from a foreign
investor's account, regardless of the extent to which gain or loss may be
realized, generally will not be subject to U.S. nonresident withholding tax.
However, such distributions may be subject to backup withholding, as
described below, unless the foreign investor certifies his non-U.S.
residency status.
Notice as to the tax status of your dividends and distributions will be
mailed to you annually. You also will receive periodic summaries of your account
which will include information as to dividends and distributions
from securities gains, if any, paid during the year.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends,
distributions from net realized securities gains and the proceeds of any
redemption, regardless of the extent to which gain or loss may be
realized, paid to a shareholder if such shareholder fails to certify either that
the TIN furnished in connection with opening an account is correct or
that such shareholder has not received notice from the IRS of being
subject to backup withholding as a result of a failure to properly report
taxable dividend or interest income on a Federal income tax return.
Furthermore, the IRS may notify the Fund to institute backup withholding
if the IRS determines a shareholder's TIN is incorrect or if a shareholder
has failed to properly report taxable dividend and interest income on a
Federal income tax return.
A TIN is either the Social Security number or employer identification number
of the record owner of the
23
account. Any tax withheld as a result of backup withholding does not constitute
an additional tax imposed on the record owner of the account, and may be claimed
as a credit on the record owner's Federal income tax return.
It is expected that each Portfolio will qualify as a "regulated
investment company" under the Code so long as such qualification is in the
best interests of its shareholders. Such qualification relieves the
Portfolio of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code. In addition,
each Portfolio is subject to a non-deductible 4% excise tax,
measured with respect to certain undistributed amounts of taxable
investment income and capital gains.
You should consult your tax adviser regarding specific questions as to
Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance will be calculated on the
basis of average annual total return. Advertisements also may include
performance calculated on the basis of total return.
Average annual total return is calculated pursuant to a standardized formula
which assumes that an investment in the Portfolios was
purchased with an initial payment of $1,000 and that the investment was redeemed
at the end of a stated period of time, after giving effect to the reinvestment
of dividends and distributions during the period. The return
is expressed as a percentage rate which, if applied on a compounded
annual basis, would result in the redeemable value of the investment at
the end of the period. Advertisements of each Portfolio's performance will
include such Portfolio's average annual total return for one, five and ten
year periods, or for shorter periods depending upon the length of time
during which the Portfolio has operated. Computations of average annual
total return for periods of less than one year represent an annualization of the
Portfolio's actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is expressed
as a percentage rate which is calculated by combining the
income and principal changes for a specified period and dividing by the net
asset value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a hypothetical
investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not necessarily
representative of future results. You should remember that performance is a
function of portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses. Performance information, such
as that described above, may not provide a basis for comparison with other
investments or other investment companies using a different method of
calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Standard & Poor's 500 Composite Stock Price
Index, Wilshire 5000 Index, the Dow Jones Industrial Average, MONEY
MAGAZINE, Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on November 16, 1993,
and has not engaged in active business to the date of this Prospectus. The
Fund is authorized to issue 400 million shares of Common Stock (with 100 million
allocated to each Portfolio), par value $.001 per share. Each share
has one vote.
Unless otherwise required by the Investment Company Act of 1940,
ordinarily it will not be necessary for the Fund to hold annual meetings of
shareholders. As a result, Fund shareholders may not consider each year
the election of Directors or the appointment of auditors. However,
pursuant to the Fund's By-Laws, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Fund to hold a special
meeting of shareholders for purposes of removing a Director from office
or for any other purpose. Fund shareholders may remove a Director by the
affirmative vote of a majority of the Fund's outstanding voting shares. In
addition, the Board of Directors will call a meeting of shareholders for
the purpose of electing Directors if, at any time, less than a majority of
the Directors then holding office have been elected by shareholders.
To date, the Board of Directors has authorized the creation of four
series of shares. All consideration
24
received by the Fund for shares of one of the Portfolios and all assets in which
such consideration is invested will belong to that Portfolio (subject only to
the rights of creditors of the Fund) and will be subject to the liabilities
related thereto. The income attributable to, and the expenses of, one Portfolio
are treated separately from those of the other Portfolios. The Fund has the
ability to create, from time to time, new series without shareholder approval.
Rule 18f-2 under the Investment Company Act of 1940 provides that
any matter required to be submitted under the provisions of the
Investment Company Act of 1940 or applicable state law or otherwise to
the holders of the outstanding voting securities of an investment
company, such as the Fund, will not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
shares of each Portfolio affected by such matter. Rule 18f-2 further
provides that a Portfolio shall be deemed to be affected by a matter
unless it is clear that the interests of each Portfolio in the matter are
identical or that the matter does not affect any interest of such Portfolio.
However, the Rule exempts the selection of independent accountants and
the election of Directors from the separate voting requirements of the Rule.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquires may be made to your Service Agent or by writing
to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or
by calling toll free, 1-800-645-6561. In New York City, call 1-718-895-1206
(elsewhere in New York State, call collect); on Long Island,
call 794-5200.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND IN THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFER OF THE FUND'S SHARES, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY
PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
25
DREYFUS FOCUS FUNDS, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
DECEMBER 23, 1993
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Focus Funds, Inc. (the "Fund"), dated December 23, 1993, as it may be
revised from time to time. To obtain a copy of the Fund's Prospectus, please
write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-
0144, or call the following numbers:
Outside New York State -- Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
(Outside New York City -- Call Collect)
On Long Island -- Call 794-5200
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned
subsidiary of Dreyfus, is the distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . . . . . . B-8
Management Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . B-10
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . . B-11
Distribution Plan and Shareholder Services Plan B-12
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . B-13
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . . . . . B-15
Determination of Net Asset Value. . . . . . . . . . . . . . . . . . . . . B-18
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . . . . B-19
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . B-21
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . B-22
Information About the Fund. . . . . . . . . . . . . . . . . . . . . . . . B-22
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . . . . . . . . . . . . . B-23
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . B-28
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . . . B-32
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Description of the Fund."
Portfolio Securities
Bank Obligations. Domestic commercial banks organized under Federal law are
supervised and examined by the Comptroller of the Currency and are required
to be members of the Federal Reserve System and to have their deposits insured
by the Federal Deposit Insurance Corporation (the "FDIC"). Domestic banks
organized under state law are supervised and examined by state banking
authorities but are members of the Federal Reserve System only if they elect
to join. In addition, state banks whose certificates of deposit ("CDs") may
be purchased by each Portfolio are insured by the FDIC (although such
insurance may not be of material benefit to the Fund, depending on the
principal amount of the CDs of each bank held by the Fund) and are subject to
Federal examination and to a substantial body of Federal law and regulation.
As a result of Federal or state laws and regulations, domestic branches of
domestic banks whose CDs may be purchased by the Portfolios generally are
required, among other things, to maintain specified levels of reserves, are
limited in the amounts which they can loan to a single borrower and are
subject to other regulation designed to promote financial soundness. However,
not all of such laws and regulations apply to the foreign branches of domestic
banks.
Obligations of foreign branches of domestic banks, foreign subsidiaries
of domestic banks and domestic and foreign branches of foreign banks, such as
CDs and time deposits ("TDs"), may be general obligations of the parent banks
in addition to the issuing branch, or may be limited by the terms of a
specific obligation and governmental regulation. Such obligations are subject
to different risks than are those of domestic banks. These risks include
foreign economic and political developments, foreign governmental restrictions
that may adversely affect payment of principal and interest on the
obligations, foreign exchange controls and foreign withholding and other taxes
on interest income. These foreign branches and subsidiaries are not
necessarily subject to the same or similar regulatory requirements that apply
to domestic banks, such as mandatory reserve requirements, loan limitations,
and accounting, auditing and financial record keeping requirements. In
addition, less information may be publicly available about a foreign branch
of a domestic bank or about a foreign bank than about a domestic bank.
Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation or by Federal or state
regulation as well as governmental action in the country in which the foreign
bank has its head office. A domestic branch of a foreign bank with assets in
excess of $1 billion may be subject to reserve requirements imposed by the
Federal Reserve System or by the state in which the branch is located if the
branch is licensed in that state.
In addition, Federal branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State Branches") may be
required to:
(1) pledge to the regulator, by depositing assets with a designated bank
within the state, a certain percentage of their assets as fixed from time to
time by the appropriate regulatory authority; and (2) maintain assets within
the state in an amount equal to a specified percentage of the aggregate amount
of liabilities of the foreign bank payable at or through all of its agencies
or branches within the state. The deposits of Federal and State Branches
generally must be insured by the FDIC if such branches take deposits of less
than $100,000.
In view of the foregoing factors associated with the purchase of CDs
and TDs issued by foreign branches of domestic banks, by foreign subsidiaries of
domestic banks, by foreign branches of foreign banks or by domestic branches
of foreign banks, the Manager carefully evaluates such investments on a case-
by-case basis.
Management Policies
Each Portfolio may engage in the following practices in furtherance of
its objective.
Options Transactions. Each Portfolio may engage in options
transactions, such as purchasing or writing covered call or put options. The
principal reason for writing covered call options is to realize, through the
receipt of premiums, a greater return than would be realized on the Portfolio's
securities alone. In return for a premium, the writer of a covered call
option forfeits the right to any appreciation in the value of the underlying
security above the strike price for the life of the option (or until a closing
purchase transaction can be effected). Nevertheless, the call writer retains
the risk of a decline in the price of the underlying security. Similarly, the
principal reason for writing covered put options is to realize income in the
form of premiums. The writer of a covered put option accepts the risk of a
decline in the price of the underlying security. The size of the premiums
that the Portfolios may receive may be adversely affected as new or existing
institutions, including other investment companies, engage in or increase
their option-writing activities.
Options written ordinarily will have expiration dates between one and
nine months from the date written. The exercise price of the options may be
below, equal to or above the market values of the underlying securities at the
time the options are written. In the case of call options, these exercise
prices are referred to as "in-the-money," "at-the-money" and "out-of-the-
money," respectively. Each Portfolio may write (a) in-the-money call options
when the Manager expects that the price of the underlying security will remain
stable or decline moderately during the option period, (b) at-the-money call
options when the Manager expects that the price of the underlying security
will remain stable or advance moderately during the option period and (c) out-
of-the-money call options when the Manager expects that the premiums received
from writing the call option plus the appreciation in market price of the
underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. In these
circumstances, if the market price of the underlying security declines and the
security is sold at this lower price, the amount of any realized loss will be
offset wholly or in part by the premium received. Out-of-the-money, at-the-
money and in-the-money put options (the reverse of call options as to the
relation of exercise price to market price) may be utilized in the same market
environments that such call options are used in equivalent transactions.
So long as the Portfolio's obligation as the writer of an option
continues, the Portfolio may be assigned an exercise notice by the broker-
dealer through which the option was sold, requiring the Portfolio to deliver,
in the case of a call, or take delivery of, in the case of a put, the
underlying security against payment of the exercise price. This obligation
terminates when the option expires or the Portfolio effects a closing purchase
transaction. The Portfolio can no longer effect a closing purchase
transaction with respect to an option once it has been assigned an exercise
notice.
While it may choose to do otherwise, each Portfolio generally will
purchase or write only those options for which the Manager believes there is
an active secondary market so as to facilitate closing transactions. There
is no assurance that sufficient trading interest to create a liquid secondary
market on a securities exchange will exist for any particular option or at any
particular time, and for some options no such secondary market may exist. A
liquid secondary market in an option may cease to exist for a variety of
reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that otherwise may interfere with the
timely execution of customers' orders, will not recur. In such event, it
might not be possible to effect closing transactions in particular options.
If as a covered call option writer a Portfolio is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise or it otherwise covers its position.
Stock Index Options. Each Portfolio may purchase and write put and
call options on stock indexes listed on U.S. or foreign securities exchanges or
traded in the over-the-counter market. A stock index fluctuates with changes
in the market values of the stocks included in the index.
Options on stock indexes are similar to options on stock except that
(a) the expiration cycles of stock index options are generally monthly, while
those of stock options are currently quarterly, and (b) the delivery
requirements are different. Instead of giving the right to take or make
delivery of a stock at a specified price, an option on a stock index gives the
holder the right to receive a cash "exercise settlement amount" equal to
(i) the amount, if any, by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of exercise, multiplied by
(ii) a fixed "index multiplier." Receipt of this cash amount will depend upon
the closing level of the stock index upon which the option is based being
greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. The amount of cash received will be equal to
such difference between the closing price of the index and the exercise price
of the option expressed in dollars times a specified multiple. The writer of
the option is obligated, in return for the premium received, to make delivery
of this amount. The writer may offset its position in stock index options
prior to expiration by entering into a closing transaction on an exchange or
it may let the option expire unexercised.
Futures Contracts and Options on Futures Contracts. Upon exercise of
an option, the writer of the option will deliver to the holder of the option the
futures position and the accumulated balance in the writer's futures margin
account, which represents the amount by which the market price of the futures
contract exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures contract. The potential
loss related to the purchase of options on futures contracts is limited to the
premium paid for the option (plus transaction costs). Because the value of
the option is fixed at the time of sale, there are no daily cash payments to
reflect changes in the value of the underlying contract; however, the value
of the option does change daily and that change would be reflected in the net
asset value of the Portfolio.
Foreign Currency Transactions. If a Portfolio enters into a currency
transaction, it will deposit, if so required by applicable regulations, with
its custodian cash or readily marketable securities in a segregated account
of the Portfolio in an amount at least equal to the value of the Portfolio's
total assets committed to the consummation of the forward contract. If the
value of the securities placed in the segregated account declines, additional
cash or securities will be placed in the account so that the value of the
account will equal the amount of the Portfolio's commitment with respect to
the contract.
At or before the maturity of a forward contract, the Portfolio either
may sell a security and make delivery of the currency, or retain the security
and offset its contractual obligation to deliver the currency by purchasing a
second contract pursuant to which the Portfolio will obtain, on the same
maturity date, the same amount of the currency which it is obligated to
deliver. If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio, at the time of execution of the
offsetting transaction, will incur a gain or loss to the extent movement has
occurred in forward contract prices. Should forward prices decline during the
period between the Portfolio's entering into a forward contract for the sale
of a currency and the date it enters into an offsetting contract for the
purchase of the currency, the Portfolio will realize a gain to the extent the
price of the currency it has agreed to sell exceeds the price of the currency
it has agreed to purchase. Should forward prices increase, the Portfolio will
suffer a loss to the extent the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.
The cost to a Portfolio of engaging in currency transactions varies
with factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because transactions in currency
exchange usually are conducted on a principal basis, no fees or commissions
are involved. The use of forward currency exchange contracts does not
eliminate fluctuations in the underlying prices of the securities, but it does
establish a rate of exchange that can be achieved in the future. If a
devaluation generally is anticipated, the Portfolio may not be able to
contract to sell the currency at a price above the devaluation level it
anticipates. The requirements for qualification as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code"), may
cause the Portfolios to restrict the degree to which they engage in currency
transactions. See "Dividends, Distributions and Taxes."
Lending Portfolio Securities. To a limited extent, each Portfolio may
lend its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value of
the securities loaned. By lending its securities, the Portfolio can increase
its income through the investment of the cash collateral. For purposes of
this policy, the Fund considers collateral consisting of U.S. Government
securities or irrevocable letters of credit issued by banks whose securities
meet the standards for investment by the Portfolio to be the equivalent of
cash. From time to time, the Fund may return to the borrower or a third party
which is unaffiliated with the Fund, and which is acting as a "placing
broker," a part of the interest earned from the investment of collateral
received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Portfolio must receive at least 100% cash collateral from the
borrower; (2) the borrower must increase such collateral whenever the market
value of the securities rises above the level of such collateral; (3) the
Portfolio must be able to terminate the loan at any time; (4) the Portfolio
must receive reasonable interest on the loan, as well as any dividends,
interest or other distributions payable on the loaned securities, and any
increase in market value; (5) the Portfolio may pay only reasonable custodian
fees in connection with the loan; and (6) while voting rights on the loaned
securities may pass to the borrower, the Fund's Board of Directors must
terminate the loan and regain the right to vote the securities if a material
event adversely affecting the investment occurs. These conditions may be
subject to future modification.
Investment Restrictions. Each Portfolio has adopted investment
restrictions numbered 1 through 10 as fundamental policies. These
restrictions cannot be changed, as to a Portfolio, without approval by the
holders of a majority (as defined in the Investment Company Act of 1940, as
amended (the "Act")) of such Portfolio's outstanding voting shares.
Investment restrictions numbered 11 through 16 are not fundamental policies
and may be changed by vote of a majority of the Fund's Directors at any time.
No Portfolio may:
1. Invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of the Portfolio's total assets may
be invested, and securities issued or guaranteed by the U.S. Government, or
its agencies or instrumentalities may be purchased, without regard to any such
limitation.
2. Hold more than 10% of the outstanding voting securities of any
single issuer. This Investment Restriction applies only with respect to 75%
of the Portfolio's total assets.
3. Invest more than 25% of the value of its total assets in the
securities of issuers in any single industry, provided that there shall be no
limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
4. Invest in commodities, except that the Portfolio may purchase and
sell options, forward contracts, futures contracts, including those relating
to indexes, and options on futures contracts or indexes.
5. Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but the Portfolio may purchase
and sell securities that are secured by real estate or issued by companies
that invest or deal in real estate or real estate investment trusts.
6. Borrow money, except to the extent permitted under the Act. For
purposes of this Investment Restriction, the entry into options, forward
contracts, futures contracts, including those relating to indexes, and options
on futures contracts or indexes shall not constitute borrowing.
7. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, the Portfolio
may lend its portfolio securities in an amount not to exceed 33-1/3% of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange Commission
and the Fund's Board of Directors.
8. Act as an underwriter of securities of other issuers, except to the
extent the Portfolio may be deemed an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio securities.
9. Issue any senior security (as such term is defined in Section 18(f)
of the Act), except to the extent the activities permitted in Investment
Restriction Nos. 4, 6, 13 and 14 may be deemed to give rise to a senior
security.
10. Purchase securities on margin, but the Portfolio may make margin
deposits in connection with transactions in options, forward contracts,
futures contracts, including those relating to indexes, and options on futures
contracts or indexes.
11. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessor) if such
purchase would cause the value of the Portfolio's investments in all such
companies to exceed 5% of the value of its total assets.
12. Invest in the securities of a company for the purpose of
exercising management or control, but the Portfolio will vote the securities
it owns in its portfolio as a shareholder in accordance with its views.
13. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when-issued or forward commitment basis and the
deposit of assets in escrow in connection with writing covered put and call
options and collateral and initial or variation margin arrangements with
respect to options, forward contracts, futures contracts, including those
relating to indexes, and options on futures contracts or indexes.
14. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Fund's Prospectus and Statement of Additional
Information.
15. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid, if,
in the aggregate, more than 15% of the value of the Portfolio's net assets
would be so invested.
16. Purchase securities of other investment companies, except to the
extent permitted under the Act.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will
not constitute a violation of such restriction.
Each Portfolio may invest, notwithstanding any other investment
restriction (whether or not fundamental), all of its assets in the securities
of a single open-end management investment company with substantially the same
fundamental investment objective, policies and restrictions as the Portfolio.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Portfolio shares in certain states.
Should the Fund determine that a commitment is no longer in the best interest
of the Portfolio and its shareholders, the Fund reserves the right to revoke
the commitment by terminating the sale of such Portfolio's shares in the state
involved.
MANAGEMENT OF THE FUND
Directors and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below. Each Director who is deemed to be an "interested person" of the
Fund, as defined in the Act, is indicated by an asterisk.
Directors and Officers of the Fund
*HOWARD STEIN, President, Investment Officer and Director. Chairman of the
Board and Chief Executive Officer of the Manager, Chairman of the Board
of the Distributor and an officer, director, general partner or trustee
of other investment companies advised and administered by the Manager.
His address is 200 Park Avenue, New York, New York 10166.
EHUD HOUMINER, Director. Since July, 1991, Professor and Executive-
in-Residence at the Columbia Business School, Columbia University and,
since February, 1992, a Consultant to Bear Stearns & Co., Inc.,
investment bankers. He was President and Chief Executive Officer of
Philip Morris USA, manufacturers of consumer products, from December
1988 until September 1990. He is a Director of Avnet Inc. His address
is Columbia Business School, Columbia University, Uris Hall, Room 526,
New York, New York 10027.
GLORIA MESSINGER, Director. From 1981 to 1993, Managing Director and Chief
Executive Officer of ASCAP (American Society of Composers, Authors and
Publishers). She is a member of the Board of Directors of the Yale Law
School Fund and was secretary of the ASCAP and served as a Trustee of
the Copyright Society of the United States. She is also a member of
numerous professional and civic organizations. Her address is 747
Third Avenue, 11th Floor, New York, new York 10017.
For so long as the Fund's plans described in the section captioned
"Distribution Plan and Shareholder Services Plan" remain in effect, the
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, will be selected and nominated by the Directors who are not
"interested persons" of the Fund.
Officers of the Fund Not Listed Above
DANIEL C. MACLEAN, Vice President. Vice President and General
Counsel of the Manager, Secretary of the Distributor and an officer or
director of other investment companies advised or administered by the
Manager.
MARK N. JACOBS, Vice President. Secretary and Deputy General
Counsel of the Manager and an officer of other investment companies
advised or administered by the Manager.
JEFFREY N. NACHMAN, Vice President and Treasurer. Vice President-Mutual Fund
Accounting of the Manager and an officer of other investment companies
advised or administered by the Manager.
THOMAS J. DURANTE, Controller. Senior Accounting Manager in the Fund
Accounting Department of the Manager and an officer of other investment
companies advised or administered by the Manager.
STEVEN F. NEWMAN, Secretary. Associate General Counsel of the Manager and an
officer of other investment companies advised or administered by the
Manager.
MICHAEL A. ROSENBERG, Assistant Secretary. Since October 1991, an Attorney
in the Manager's Legal Department. From October 1990 to October 1991,
Associate with Sheriff, Friedman, Hoffman & Goodman. From 1986 to
September, 1989, Financial Analyst with the Securities and Exchange
Commission, Division of Investment Management.
CHRISTINE PAVALOS, Assistant Secretary. Assistant Secretary of the Manager,
the Distributor and other investment companies advised or administered
by the Manager.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
MANAGEMENT AGREEMENT
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated December 17, 1993, with the Fund. As to
each Portfolio, the Agreement is subject to annual approval by (i) the Fund's
Board of Directors or (ii) vote of a majority (as defined in the Act) of the
outstanding voting securities of the such Portfolio, provided that in either
event the continuance also is approved by a majority of the Directors who are
not "interested persons" (as defined in the Act) of the Fund or the Manager,
by vote cast in person at a meeting called for the purpose of voting on such
approval. As to each Portfolio, the Agreement is terminable without penalty,
on 60 days' notice, by the Fund's Board of Directors or by vote of the holders
of a majority of such Portfolio's shares, or, on not less than 90 days'
notice, by the Manager. The Agreement will terminate automatically, as to the
relevant Portfolio, in the event of its assignment (as defined in the Act).
The Manager manages each Portfolio's investments in accordance with the
stated policies of such Portfolio, subject to the approval of the Fund's Board
of Directors. The Manager is responsible for investment decisions, and
provides the Fund with Investment Officers who are authorized by the Board of
Directors to execute purchases and sales of securities. The Fund's Investment
Officers are Howard Stein, Patricia A. Cuddy, Richard B. Hoey and Barbara L.
Kenworthy. The Manager also maintains a research department with a
professional staff of portfolio managers and securities analysts who provide
research services for the Fund as well as for other funds advised by the
Manager. All purchases and sales are reported for the Directors' review at
the meeting subsequent to such transactions.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The expenses
borne by the Fund include: organizational costs, taxes, interest, loan
commitment fees, interest and distributions paid on securities sold short,
brokerage fees and commissions, if any, fees of Directors who are not officers,
directors, employees or holders of 5% or more of the outstanding voting
securities of the Manager, Securities and Exchange Commission fees, state
Blue Sky qualification fees, advisory fees, charges of custodians, transfer
and dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of maintaining the
Fund's existence, costs of independent pricing services, costs attributable to
investor services (including, without limitation, telephone and personnel
expenses), costs of shareholders' reports and corporate meetings, costs of
preparing and printing certain prospectuses and statements of additional
information, and any extraordinary expenses.
Expenses attributable to a particular Portfolio are
charged against the assets of that Portfolio; other expenses of the Fund are
allocated between the Portfolios on the basis determined by the Board of
Directors, including, but not limited to, proportionately in relation to the
net assets of each Portfolio.
In addition, the Fund is subject to an annual distribution fee for
advertising, marketing and distributing Portfolio shares and an annual service
fee for ongoing personal services relating to shareholder accounts and
services related to the maintenance of shareholder accounts. See
"Distribution Plan and Shareholder Services Plan."
The Manager pays the salaries of all officers and employees employed by
both it and the Fund, maintains office facilities, and furnishes statistical
and research data, clerical help, accounting, data processing, bookkeeping and
internal auditing and certain other required services. The Manager also may
make such advertising and promotional expenditures, using its own resources,
as it from time to time deems appropriate.
As to each Portfolio, the Manager has agreed that if in any fiscal year
the aggregate expenses of the Portfolio, exclusive of taxes, brokerage,
interest on borrowings and (with the prior written consent of the necessary
state securities commissions) extraordinary expenses, but including the
management fee, exceed the expense limitation of any state having jurisdiction
over the Fund, the Fund may deduct from the payment to be made to the Manager
under the Agreement, or the Manager will bear, such excess expense to the
extent required by state law. Such deduction or payment, if any, will be
estimated daily, and reconciled and effected or paid, as the case may be, on
a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of a Portfolio's net assets increases.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and for
certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made between the hours of 8:00 a.m. and 4:00 p.m., New York time, on any
business day that The Shareholder Services Group, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange are open. Such purchases will be credited to the shareholder's Fund
account on the next bank business day. To qualify to use the Dreyfus
TeleTransfer Privilege, the initial payment for purchase of Fund shares must
be drawn on, and redemption proceeds paid to, the same bank and account as are
designated on the Account Application or Optional Services Form on file. If
the proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Fund Shares--Dreyfus TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year, provided the information on the old Account Application is
still applicable.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distribution Plan and
Shareholder Services Plan."
Portfolio shares are subject to a Distribution Plan and a Shareholder
Services Plan.
Distribution Plan. Rule 12b-1 (the "Rule") adopted by the Securities
and Exchange Commission under the Act provides, among other things, that an
investment company may bear expenses of distributing its shares only pursuant
to a plan adopted in accordance with the Rule. The Fund's Board of Directors
has adopted such a plan (the "Distribution Plan") with respect to the
Portfolios' shares, pursuant to which the Fund pays the Distributor for
advertising, marketing and distributing Portfolio shares. Under the
Distribution Plan, the Distributor may make payments to certain financial
institutions, securities dealers and other financial industry professionals
(collectively, "Service Agents") in respect to these services. The Fund's
Board of Directors believes that there is a reasonable likelihood that the
Distribution Plan will benefit each Portfolio and its shareholders. In some
states, certain financial institutions effecting transactions in Portfolio
shares may be required to register as dealers pursuant to state law.
A quarterly report of the amounts expended under the Distribution Plan,
and the purposes for which such expenditures were incurred, must be made to
the Directors for their review. In addition, the Distribution Plan provides
that it may not be amended to increase materially the costs which Portfolio
shareholders may bear for distribution pursuant to the Distribution Plan
without shareholder approval and that other material amendments of the
Distribution Plan must be approved by the Board of Directors, and by the
Directors who are not "interested persons" (as defined in the Act) of the Fund
and have no direct or indirect financial interest in the operation of the
Distribution Plan or in any agreements entered into in connection with the
Distribution Plan, by vote cast in person at a meeting called for the purpose
of considering such amendments. The Distribution Plan is subject to annual
approval by such vote of the Directors cast in person at a meeting called for
the purpose of voting on the Distribution Plan. The Distribution Plan may be
terminated at any time with respect to each Portfolio by vote of a majority
of the Directors who are not "interested persons" and have no direct or
indirect financial interest in the operation of the Distribution Plan or in
any agreements entered into in connection with the Distribution Plan or by
vote of the holders of a majority of the Portfolio's shares.
Shareholder Services Plan. The Fund has adopted a Shareholder Services
Plan, pursuant to which the Fund pays the Distributor for the provision of
certain services to each Portfolio's shareholders.
A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred, must
be made to the Directors for their review. In addition, the Shareholder
Services Plan provides that it may not be amended without approval of the
Directors, and by the Directors who are not "interested persons" (as defined
in the Act) of the Fund and have no direct or indirect financial interest in
the operation of the Shareholder Services Plan or in any agreements entered
into in connection with the Shareholder Services Plan, by vote cast in person
at a meeting called for the purpose of considering such amendments. The
Shareholder Services Plan is subject to annual approval by such vote of the
Directors cast in person at a meeting called for the purpose of voting on the
Shareholder Services Plan. The Shareholder Services Plan is terminable at any
time with respect to each Portfolio by vote of a majority of the Directors who
are not "interested persons" and have no direct or indirect financial interest
in the operation of the Shareholder Services Plan or in any agreements entered
into in connection with the Shareholder Services Plan.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Service Agent, and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the redemption
request in proper form. Redemption proceeds will be transferred by Federal
Reserve wire only to the commercial bank account specified by the investor on
the Account Application or Optional Services Form. Redemption proceeds, if
wired, must be in the amount of $1,000 or more and will be wired to the
investor's account at the bank of record designated in the investor's file at
the Transfer Agent, if the investor's bank is a member of the Federal Reserve
System, or to a correspondent bank if the investor's bank is not a member.
Fees ordinarily are imposed by such bank and usually are borne by the
investor. Immediate notification by the correspondent bank to the investor's
bank is necessary to avoid a delay in crediting the funds to the investor's
bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
________________ _________________
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may have
the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171,
toll free. Investors should advise the operator that the above transmittal
code must be used and should also inform the operator of the Transfer Agent's
answer back sign.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as
described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through the
Automated Clearing House ("ACH") system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Fund Shares--Dreyfus
TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request. Written
redemption requests must be signed by each shareholder, including each holder
of a joint account, and each signature must be guaranteed. Signatures on
endorsed certificates submitted for redemption also must be guaranteed. The
Transfer Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations, as well as from participants in the New York Stock Exchange
Medallion Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-Guaranteed"
must appear with the signature. The Transfer Agent may request additional
documentation from corporations, executors, administrators, trustees or guard-
ians, and may accept other suitable verification arrangements from foreign
investors, such as consular verification. For more information with respect
to signature-guarantees, please call one of the telephone numbers listed on
the cover.
Redemption Commitment. The Fund has committed itself to pay in cash all
redemption requests by any shareholder of record of a Portfolio, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of such Portfolio's net assets at the beginning of such period. Such
commitment is irrevocable without the prior approval of the Securities and
Exchange Commission. In the case of requests for redemption in excess of such
amount, the Board of Directors reserves the right to make payments in whole
or in part in securities or other assets in case of an emergency or any time
a cash distribution would impair the liquidity of the Portfolio to the
detriment of the existing shareholders. In such event, the securities would
be valued in the same manner as the Portfolio's securities are valued. If the
recipient sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b)
when trading in the markets the Fund ordinarily utilizes is restricted, or
when an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the Fund's investments or determination of its
net asset value is not reasonably practicable, or (c) for such other periods
as the Securities and Exchange Commission by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Exchange Privilege. Shares of other Portfolios of the Fund or other
funds purchased by exchange will be purchased on the basis of relative net
asset value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a sales
load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or distributions of any such funds (collectively referred
to herein as "Purchased Shares") may be exchanged for shares of
other funds sold with a sales load (referred to herein as "Offered
Shares"), provided that, if the sales load applicable to the
Offered Shares exceeds the maximum sales load that could have been
imposed in connection with the Purchased Shares (at the time the
Purchased Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To use this Privilege, an investor or the investor's Service Agent acting
on the investor's behalf must give exchange instructions to the Transfer Agent
in writing, by wire or by telephone. Telephone exchanges may be made only if
the appropriate "YES" box has been checked on the Account Application, or a
separate signed Optional Services Form is on file with the Transfer Agent.
By using this Privilege, the investor authorizes the Transfer Agent to act on
telephonic, telegraphic or written exchange instructions from any person
representing himself or herself to be the investor or a representative of the
investor's Service Agent, and reasonably believed by the Transfer Agent to be
genuine. Telephone exchanges may be subject to limitations as to the amount
involved or the number of telephone exchanges permitted. Shares issued in
certificate form are not eligible for telephone exchange.
To establish a Personal Retirement Plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. For Dreyfus-
sponsored Keogh Plans, IRAs and SEP-IRAs with only one participant, the
minimum initial investment is $750. To exchange shares held in Corporate
Plans, 403(b)(7) Plans and IRAs set up under a Simplified Employee Pension
Plan ("SEP-IRAs") with more than one participant, the minimum initial
investment is $100 if the plan has at least $2,500 invested among the funds
in the Dreyfus Family of Funds. To exchange shares held in Personal
Retirement Plans, the shares exchanged must have a current value of at least
$100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange permits an
investor to purchase, in exchange for shares of a Portfolio, shares of one of
the other Portfolios of the Fund or shares of another fund in the Dreyfus
Family of Funds. This Privilege is available only for existing accounts.
Shares will be exchanged on the basis of relative net asset value as set forth
under "Exchange Privilege" above. Enrollment in or modification or
cancellation of this Privilege is effective three business days following
notification by the investor. An investor will be notified if his account
falls below the amount designated to be exchanged under this Privilege. In
this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
Auto-Exchange transaction. Shares held under IRA and other retirement plans
are eligible for this Privilege. Exchanges of IRA shares may be made between
IRA accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement accounts,
exchanges may be made only among those accounts.
The Exchange Privilege and Dreyfus Auto-Exchange Privilege are available
to shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Optional Services Forms and prospectuses of the other funds may be
obtained from the Distributor, 144 Glenn Curtiss Boulevard, Uniondale, New
York 11556-0144. The Fund reserves the right to reject any exchange request
in whole or in part. The Exchange Privilege or the Dreyfus Auto-Exchange
Privilege may be modified or terminated at any time upon notice to
shareholders.
Automatic Withdrawal Plan. Automatic Withdrawal permits an investor with
a $5,000 minimum account to request withdrawal of a specified dollar amount
(minimum of $50) on either a monthly or quarterly basis. Withdrawal payments
are the proceeds from sales of Fund shares, not the yield on the shares. If
withdrawal payments exceed reinvested dividends and distributions, the
investor's shares will be reduced and eventually may be depleted. An
Automatic Withdrawal Plan may be established by completing the appropriate
application available from the Distributor. There is a service charge of $.50
for each withdrawal check. Automatic Withdrawal may be terminated at any time
by the investor, the Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
Dreyfus Dividend Sweep Privilege. Dreyfus Dividend Sweep Privilege
allows investors to invest on the payment date their dividends or dividends
and capital gain distributions, if any, from a Portfolio in shares of another
Portfolio of the Fund or shares of another fund in the Dreyfus Family of Funds
of which the investor is a shareholder. Shares of other funds purchased
pursuant to this Privilege will be purchased on the basis of relative net
asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that
are offered without a sales load.
B. Dividends and distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided
that, if the sales load applicable to the Offered Shares exceeds
the maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any reduced
loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge and the applicable contingent deferred sales charge, if any,
will be imposed upon redemption of such shares.
Personal Retirement Plans. The Fund makes available Keogh Plans and
IRAs, including SEP-IRAs and IRA "Rollover Accounts" for individuals. Plan
support services also are available. For details, please contact the Dreyfus
Group Retirement Plans, a division of the Distributor, by calling toll free
1-800-358-5566.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan or an IRA, including an SEP-IRA, may request from the Distributor forms
for adoption of such plans.
The entity acting as custodian for Keogh Plans or IRAs may charge a fee,
payment of which could require the liquidation of shares. All fees charged
are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for Dreyfus-sponsored Keogh Plans, IRAs
and SEP-IRAs with only one participant, is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA may also open a non-working
spousal IRA with a minimum investment of $250.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
Valuation of Portfolio Securities. Each Portfolio's securities,
including covered call options written by a Portfolio, are valued at the last
sale price on the securities exchange or national securities market on which
such securities primarily are traded. Securities not listed on an exchange or
national securities market, or securities in which there were no transactions,
are valued at the average of the most recent bid and asked prices, except in
the case of open short positions where the asked price is used for valuation
purposes. Bid price is used when no asked price is available. Any assets or
liabilities initially expressed in terms of foreign currency will be
translated into dollars at the midpoint of the New York interbank market spot
exchange rate as quoted on the day of such translation by the Federal Reserve
Bank of New York or if no such rate is quoted on such date, at the exchange
rate previously quoted by the Federal Reserve Bank of New York or at such
other quoted market exchange rate as may be determined to be appropriate by
the Manager. Forward currency contracts will be valued at the current cost
of offsetting the contract. Because of the need to obtain prices as of the
close of trading on various exchanges throughout the world, the calculation
of net asset value does not take place contemporaneously with the
determination of prices of certain of the Portfolios' securities. Short-term
investments are carried at amortized cost, which approximates value. Any
securities or other assets for which recent market quotations are not readily
available are valued at fair value as determined in good faith by the Fund's
Board of Directors. Expenses and fees of the Fund, including the management
fee paid by the Fund and fees pursuant to the Distribution Plan and
Shareholder Services Plan are accrued daily and taken into account for the
purpose of determining the net asset value of Fund shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors
will review the method of valuation on a current basis. In making their good
faith valuation of restricted securities, the Directors generally will take
the following factors into consideration: restricted securities which are, or
are convertible into, securities of the same class of securities for which a
public market exists usually will be valued at market value less the same
percentage discount at which purchased. This discount will be revised
periodically by the Board of Directors if the Directors believe that it no
longer reflects the value of the restricted securities. Restricted securities
not of the same class as securities for which a public market exists usually
will be valued initially at cost. Any subsequent adjustment from cost will
be based upon considerations deemed relevant by the Board of Directors.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Distributions
and Taxes."
It is expected that each Portfolio will qualify as a "regulated
investment company" under the Code, as long as such qualification is in the
best interests of its shareholders. As a regulated investment company, the
Portfolios will pay no Federal income tax on net investment income and net
realized securities gains to the extent that such income and gains are
distributed to shareholders in accordance with applicable provisions of the
Code. To qualify as a regulated investment company, each Portfolio must
distribute at least 90% of its net income (consisting of net investment income
and net short-term capital gain) to its shareholders, must derive less than
30% of its annual gross income from gain on the sale of securities held for
less than three months, and must meet certain asset diversification and other
requirements. Accordingly, the Portfolios may be restricted in the selling
of securities held for less than three months. The Code, however, allows the
Portfolios to net certain offsetting positions, making it easier for the
Portfolios to satisfy the 30% test. The term "regulated investment company"
does not imply the supervision of management or investment practices or
policies by any government agency.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the net asset value of the shares below the
cost of the investment. Such a dividend or distribution would be a return of
investment in an economic sense, although taxable as stated above. In
addition, the Code provides that if a shareholder holds shares of the Fund for
six months or less and has received a capital gain distribution with respect
to such shares, any loss incurred on the sale of such shares will be treated
as long-term capital loss to the extent of the capital gain distribution
received.
Depending upon the composition of a Portfolio's income, the entire amount
or a portion of the dividends paid by such Portfolio from net investment
income may qualify for the dividends received deduction allowable to
qualifying U.S. corporate shareholders ("dividends received deduction"). In
general, dividend income of a Portfolio distributed to qualifying corporate
shareholders will be eligible for the dividends received deduction only to the
extent that such Portfolio's income consists of dividends paid by U.S.
corporations. However, Section 246(c) of the Code provides that if a
qualifying corporate shareholder has disposed of Portfolio shares not held for
more than 46 days and has received a dividend from net investment income with
respect to such shares, the portion designated by the Portfolio as qualifying
for the dividends received deduction will not be eligible for such
shareholder's dividends received deduction. In addition, the Code provides
other limitations with respect to the ability of a qualifying corporate
shareholder to claim the dividends received deduction in connection with
holding Portfolio shares.
A Portfolio may qualify for and may make an election permitted under
Section 853 of the Code so that shareholders may be eligible to claim a credit
or deduction on their Federal income tax returns for, and will be required to
treat as part of the amounts distributed to them, their pro rata portion of
qualified taxes paid or incurred by the Portfolio to foreign countries (which
taxes relate primarily to investment income). A Portfolio may make an
election under Section 853, provided that more than 50% of the value of the
Portfolio's total assets at the close of the taxable year consists of
securities in foreign corporations, and the Portfolio satisfies the applicable
distribution provisions of the Code. The foreign tax credit available to
shareholders is subject to certain limitations imposed by the Code.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gains and losses. However, a portion of the gain or loss
realized from the disposition of foreign currencies (including foreign
currency denominated bank deposits) and non-U.S. dollar denominated securities
(including debt instruments and certain forward contracts and options) may be
treated as ordinary income or loss under Section 988 of the Code. In
addition, all or a portion of the gain realized from the disposition of market
discount bonds will be treated as ordinary income under section 1276. A
market discount bond is defined as any bond purchased by the Fund after April
30, 1993, and after its original issuance, at a price below its face or
accreted value. Finally, all or a portion of the gain realized from engaging
in "conversion transactions" may be treated as ordinary income under Section
1258. "Conversion transactions" are defined to include certain forward,
futures, option and straddle transactions, transactions marketed or sold to
produce capital gains, or transactions described in Treasury regulations to
be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by a Portfolio
from certain forward contracts and options transactions will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. Gain
or loss will arise upon exercise or lapse of such contracts and options as
well as from closing transactions. In addition, any such contracts or options
remaining unexercised at the end of the Portfolio's taxable year will be
treated as sold for their then fair market value, resulting in additional gain
or loss to such Portfolio characterized in the manner described above.
Offsetting positions held by a Portfolio involving certain foreign
currency forward contracts or options may constitute "straddles." "Straddles"
are defined to include "offsetting positions" in actively traded personal
property. The tax treatment of "straddles" is governed by Sections 1092 and
1258 of the Code, which, in certain circumstances, overrides or modifies the
provisions of Section 1256 and 988. As such, all or a portion of any short
or long-term capital gain from certain "straddle" transactions may be
recharacterized to ordinary income.
If a Portfolio were treated as entering into "straddles" by reason of its
engaging in certain forward contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the forward
contracts or options transactions comprising a part of such "straddles" were
governed by Section 1256 of the Code. A Portfolio may make one or more
elections with respect to "mixed straddles." Depending on which election is
made, if any, the results to the Portfolio may differ. If no election is made
to the extent the "straddle" and conversion transaction rules apply to
positions established by the Portfolio, losses realized by the Portfolio will
be deferred to the extent of unrealized gain in the offsetting position.
Moreover, as a result of the "straddle" rules, short-term capital loss on
"straddle" positions may be recharacterized as long-term capital loss, and
long-term capital gains may be treated as short-term capital gains or ordinary
income.
If a Portfolio invests in an entity that is classified as a "passive
foreign investment company" ("PFIC") for federal income tax purposes, the
operation of certain provisions of the Code applying to PFICs could result in
the imposition of certain federal income taxes on the Portfolio. Under
Proposed Treasury Regulation Section 1.1291-8(a), the Portfolios can elect to
mark-to-market gains (but not losses) from PFIC securities in lieu of paying
taxes on gain or distributions therefrom. Such gains will be treated as
ordinary income under Proposed Treasury Regulation Section 1.1291-8(b)(2).
Investment by a Portfolio in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligation could under special tax rules affect the amount, timing and
character of distributions to shareholders by causing a Portfolio to recognize
income prior to the receipt of cash payments. For example, a Portfolio could
be required to accrue as income each year a portion of the discount (or deemed
discount) at which such securities were issued and to distribute such income.
In such case, a Portfolio may have to dispose of securities which it might
otherwise have continued to hold in order to generate cash to satisfy these
distribution requirements.
PORTFOLIO TRANSACTIONS
The Manager assumes general supervision over placing orders on behalf of
the Fund for the purchase or sale of investment securities. Allocation of
brokerage transactions, including their frequency, is made in the Manager's
best judgment and in a manner deemed fair and reasonable to shareholders. The
primary consideration is prompt execution of orders at the most favorable net
price. Subject to this consideration, the brokers selected will include those
that supplement the Manager's research facilities with statistical data,
investment information, economic facts and opinions. Information so received
is in addition to and not in lieu of services required to be performed by the
Manager and the fee of the Manager is not reduced as a consequence of the
receipt of such supplemental information.
Such information may be useful to the Manager in serving both the Fund
and other funds which it manages and, conversely, supplemental information
obtained by the placement of business of other clients may be useful to the
Manager in carrying out its obligations to the Fund. Sales of Fund shares by
a broker may be taken into consideration, and brokers also will be selected
because of their ability to handle special executions such as are involved in
large block trades or broad distributions, provided the primary consideration
is met. Large block trades may, in certain cases, result from two or more
funds advised or administered by the Manager being engaged simultaneously in
the purchase or sale of the same security.
Portfolio turnover may vary from year to year as well as within a year.
It is anticipated that in any fiscal year the turnover rate of each Portfolio
may approach the 150% level; however, in periods in which extraordinary market
conditions prevail, the Manager will not be deterred from changing each
Portfolio's investment strategy as rapidly as needed, in which case higher
turnover rates can be anticipated which would result in greater brokerage
expenses. The overall reasonableness of brokerage commissions paid is
evaluated by the Manager based upon its knowledge of available information as
to the general level of commissions paid by other institutional investors for
comparable services.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance Information."
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends
and distributions), dividing by the amount of the initial investment, taking
the "n"th root of the quotient (where "n" is the number of years in the
period) and subtracting 1 from the result.
Total return is calculated by subtracting the amount of each Portfolio's
net asset value per share at the beginning of a stated period from the net
asset value per share at the end of the period (after giving effect to the
reinvestment of dividends and distributions during the period), and dividing
the result by the net asset value per share at the beginning of the period.
Comparative performance may be used from time to time in advertising the
Fund's shares, including data from Lipper Analytical Services, Inc., Standard
& Poor's 500 Composite Stock Price Index, the Wilshire 5000 Index, the Dow
Jones Industrial Average, Money Magazine, Morningstar, Inc. and other industry
publications. From time to time, the Fund may compare its performance against
inflation with the performance of other instruments against inflation, such
as short-term Treasury Bills (which are direct obligations of the U.S.
Government) and FDIC-insured bank money market accounts.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Portfolio share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Portfolio shares are of one class and have equal rights as to dividends and
in liquidation. Shares have no preemptive, subscription or conversion rights
and are freely transferable.
The Fund will send annual and semi-annual financial statements to all its
shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
The Bank of New York, 110 Washington Street, New York, New York 10286, is
the Fund's custodian. The Shareholder Services Group, Inc., a subsidiary of
First Data Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671,
is the Fund's transfer and dividend disbursing agent. Neither The Bank of New
York nor The Shareholder Services Group, Inc. has any part in determining the
investment policies of the Fund or which securities are to be purchased or
sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-
2696, as counsel for the Fund, has rendered its opinion as to certain legal
matters regarding the due authorization and valid issuance of the shares of
Common Stock being sold pursuant to the Fund's Prospectus.
Ernst & Young, 787 Seventh Avenue, New York, New York 10019, independent
auditors, have been selected as auditors of the Fund.
DREYFUS FOCUS FUNDS, INC.
DREYFUS LARGE COMPANY GROWTH
Statement of Assets and Liabilities
December 17, 1993
ASSETS
Cash $25,000
Deferred organization expenses 25,531
------
Total Assets $50,531
LIABILITIES
Accrued organization expenses 25,531
------
NET ASSETS applicable to 2,000 shares of
common stock ($.001 par value) issued
and outstanding (100 million shares
authorized) $25,000
NET ASSET VALUE, and redemption price per ======
share ($25,000/2,000 shares of common
stock issued and outstanding) $12.50
=====
NOTE - Dreyfus Focus Funds, Inc. (the "Fund") was incorporated on
November 16, 1993 and has had no operations since that date other than matters
relating to its organization and registration as an open-end investment
company under the Investment Company Act of 1940 and the Securities Act of
1933 and the sale and issuance of 2,000 shares of common stock of each
Portfolio to The Dreyfus Corporation ("Initial Shares"). Organization
expenses payable by the Fund have been deferred and will be amortized from the
date operations commence over a period which it is expected that a benefit
will be realized, not to exceed five years. If any of the Initial Shares of
any series are redeemed during the amortization period by any holder thereof,
the redemption proceeds will be reduced by any unamortized organization
expenses of that Portfolio in the same proportion as the number of Initial
Shares being redeemed bears to the number of Initial Shares outstanding of
that Portfolio at the time of the redemption.
DREYFUS FOCUS FUNDS, INC.
DREYFUS LARGE COMPANY VALUE
Statement of Assets and Liabilities
December 17, 1993
ASSETS
Cash $25,000
Deferred organization expenses 25,531
------
Total Assets $50,531
LIABILITIES
Accrued organization expenses 25,531
------
NET ASSETS applicable to 2,000 shares of
common stock ($.001 par value) issued
and outstanding (100 million shares
authorized) $25,000
======
NET ASSET VALUE, and redemption price per
share ($25,000/2,000 shares of common
stock issued and outstanding) $12.50
=====
NOTE - Dreyfus Focus Funds, Inc. (the "Fund") was incorporated on
November 16, 1993 and has had no operations since that date other than matters
relating to its organization and registration as an open-end investment
company under the Investment Company Act of 1940 and the Securities Act of
1933 and the sale and issuance of 2,000 shares of common stock of each
Portfolio to The Dreyfus Corporation ("Initial Shares"). Organization
expenses payable by the Fund have been deferred and will be amortized from the
date operations commence over a period which it is expected that a benefit
will be realized, not to exceed five years. If any of the Initial Shares of
any series are redeemed during the amortization period by any holder thereof,
the redemption proceeds will be reduced by any unamortized organization
expenses of that Portfolio in the same proportion as the number of Initial
Shares being redeemed bears to the number of Initial Shares outstanding of
that Portfolio at the time of the redemption.
DREYFUS FOCUS FUNDS, INC.
DREYFUS SMALL COMPANY GROWTH
Statement of Assets and Liabilities
December 17, 1993
ASSETS
Cash $25,000
Deferred organization expenses 25,531
------
Total Assets $50,531
LIABILITIES
Accrued organization expenses 25,531
------
NET ASSETS applicable to 2,000 shares of
common stock ($.001 par value) issued
and outstanding (100 million shares
authorized) $25,000
======
NET ASSET VALUE, and redemption price per
share ($25,000/2,000 shares of common
stock issued and outstanding) $12.50
======
NOTE - Dreyfus Focus Funds, Inc. (the "Fund") was incorporated on
November 16, 1993 and has had no operations since that date other than matters
relating to its organization and registration as an open-end investment
company under the Investment Company Act of 1940 and the Securities Act of
1933 and the sale and issuance of 2,000 shares of common stock of each
Portfolio to The Dreyfus Corporation ("Initial Shares"). Organization
expenses payable by the Fund have been deferred and will be amortized from the
date operations commence over a period which it is expected that a benefit
will be realized, not to exceed five years. If any of the Initial Shares of
any series are redeemed during the amortization period by any holder thereof,
the redemption proceeds will be reduced by any unamortized organization
expenses of that Portfolio in the same proportion as the number of Initial
Shares being redeemed bears to the number of Initial Shares outstanding of
that Portfolio at the time of the redemption.
DREYFUS FOCUS FUNDS, INC.
DREYFUS SMALL COMPANY VALUE
Statement of Assets and Liabilities
December 17, 1993
ASSETS
Cash $25,000
Deferred organization expenses 25,531
------
Total Assets $50,531
LIABILITIES
Accrued organization expenses 25,531
------
NET ASSETS applicable to 2,000 shares of
common stock ($.001 par value) issued
and outstanding (100 million shares
authorized) $25,000
NET ASSET VALUE, and redemption price per ======
share ($25,000/2,000 shares of common
stock issued and outstanding) $12.50
=====
NOTE - Dreyfus Focus Funds, Inc. (the "Fund") was incorporated on
November 16, 1993 and has had no operations since that date other than
matters relating to its organization and registration as a diversified,
open-end investment company under the Investment Company Act of 1940 and
the Securities Act of 1933 and the sale and issuance of 2,000 shares of
common stock of each Portfolio to The Dreyfus Corporation ("Initial
Shares"). Organization expenses payable by the Fund have been deferred and
will be amortized from the date operations commence over a period which it
is expected that a benefit will be realized, not to exceed five years. If
any of the Initial Shares of any series are redeemed during the
amortization period by any holder thereof, the redemption proceeds will be
reduced by any unamortized organization expenses of that series in the same
proportion as the number of Initial Shares being redeemed bears to the
number of Initial Shares outstanding of that series at the time of the
redemption.
REPORT OF INDEPENDENT AUDITORS
Shareholder and Board of Directors
Dreyfus Focus Funds, Inc.
We have audited the accompanying statements of assets and liabilities of
Dreyfus Focus Funds, Inc. (comprising Dreyfus Large Company Growth, Dreyfus
Large Company Value, Dreyfus Small Company Growth and Dreyfus Small Company
Value portfolios) as of December 17, 1993. These statements of assets and
liabilities are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these statements of assets and
liabilities based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether these statements of assets and
liabilities are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the statement of assets and liabilities. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall statement of assets and
liabilities presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of each of
the respective portfolios constituting the Dreyfus Focus Funds, Inc. at
December 17, 1993, in conformity with generally accepted accounting
principles.
New York, New York
December 20, 1993
Ernst & Young
